Does the impact economy fit in Junker’s investment plan?

di Filippo Addarii

On November 17th and 18th, the Italian Presidency of the European Union organized a “Social Economy Conference” in Rome, “one of the biggest summits on th​is subject in Europe” according to the conference leaflet, with the objective of defining “the course and objectives European policy should strive to achieve regarding the social economy”. The Commission Expert Group on Social Entrepreneurship (GECES) hold its 6th meeting in Rome in order to allow members to take part to the conference.

The atmosphere was quite different compared to the last conference organized by the Commission and GECES last January in Strasbourg Three Commissioners attended the event in Strasburg, none was seen in Rome. Around 2000 participants gathered in Strasbourg to exchange views on the future of the Social Business Initiative; in Rome speakers outnumbered the public by far. Apparently social economy and social entrepreneurship are losing momentum within the Commission political priorities. Many EU stakeholders have expressed concern for the scarcity of references to social entrepreneurship in President Juncker’s agenda, as well as in its Commissioners parliamentary hearings. Similarly, lack of leadership at Commission level is seriously threatening the future of the Social Business Initiative.

But the truth is that both the President of the Commission and Commissioners Katainen and Thyssen have clearly stated their commitment to social Europe during their parliamentary hearings, as well as their awareness of social investment’s potential in terms of economic growth. In fact, social policy is increasingly often associated to economic policy. Since the introduction of the European Semester process, and for the first time in European history social policies are part of the economic governance process, and can be effectively discussed and monitored at EU level. By ensuring that a social impact assessment accompanies fiscal sustainability assessments for countries in Excessive Deficit Procedure, the new Commission has taken another step in the process of bringing together social and economic policies. Similarly, all projects to be funded under the European Fund for Strategic Investments (EFSI) announced by the Commission in its 26th November communication “An Investment Plan for Europe” – and which should mobilize at least €315 billion in the next three years – will have to be assessed at the same time “from a commercial and societal perspective” by an Independent Investment Committee.

In this context, categories as social entrepreneurship and social economy, as well as social investment or impact investing, are too narrow to be singularly relevant at policy-making level, unless they become part of a broader project, a project where these same categories will redefine themselves as components of a single movement, where stakeholders from different sectors work to align public and private interests.

Even more radically, as we are arguing in a major Young Foundation study to be completed next January, the traditional distinction between public, private and third sector must be overcome and the “roles debate” must be refocused accordingly to the following question: how do we recognize, sustain and scale up contextual societal innovations through macro-policies and investments?

Social entrepreneurship and the social economy will continue to stay high in the EU political agenda only if they will be able to rebrand themselves as essential actors in this convergence process between economic and social governance, contextual innovation and macro-policy/investments. And the Commission will really make a difference in re-launching the EU social economy only if it will be able to lead and foster this process, starting with consolidating all the related policies and initiatives (including the Social Business Initiative, Corporate Social Responsibility and Social Innovation policies) under a single, clear policy framework.

Risks are everywhere, as well exemplified by the European Social Entrepreneurship Fund (EuSEF) regulation, where qualifying undertakings are identified with businesses and organizations targeting or employing disadvantaged categories instead of businesses or organizations pursuing at the same time social impact and profitability. Follow this path, and impact investment will soon become a nice hobby for philanthropists with a soft spot for financial instruments.

But opportunities are countless too: if the assessment of projects’ societal value is taken seriously for the funding decisions under ELTIF, it won’t be only impact investment to thrive, but everywhere across Europe innovative models of public-private-third sector partnerships could change forever our way of designing, funding and providing services of general economic interest, leading Europe towards a new phase of the economic growth and democratic participation.

In this respect it will be important to have EU decision makers implementing the new investment plan enhancing its social-impact dimension, for instance by ensuring that Impact Investment Funds as the EIF backed Social Impact Accelerator are among EFSI’s investment options on an equal footing with European Long Term Investing Funds, which are meant to receive up to three quarters of the available resources. Equally important will be to have at least one member of the Independent Expert Committees in charge of evaluating project proposals with specific expertise in social impact evaluation. Along the same line, the “Investment Task Force” charged with identifying strategic investment projects as well as the “Investment Advisory Hub” providing technical advice to projects managers across member states should be open to social impact evaluation experts and look for projects using extensive public-private-third-sector collaboration to set-up or scale new or better public services across the EU. We want to make sure that also “hard” infrastructure projects have a social investment dimension (for instance in terms of local work-force upskilling or RDI activities), and that third sector organizations are encouraged to present and sponsor projects in the projects’ pipeline together with public and private investors.

It’s time to stop worrying about the EU statute for this or that interest group, and play in the Ivy League of economic and social players. For those social innovators who are willing to overcome internal rivalries, vested interests, and work across boundaries to lead on a new vision for economic development, EU policy has never seemed more promising.

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