New financial instruments are needed if the social economy is to keep growing beyond the stimulus provided by public programmes, says a new report by the EESC, which also calls for financial training to foster private funding.

The social economy can only attract suitable investments if there are dedicated financial instruments that balance social impact with acceptable returns for investors, and fair risks to social enterprises, the EESC says in an opinion adopted in January.

Rapporteur Giuseppe Guerini said: “There is a real need to facilitate the connection between the world of private investment and the world of the social economy. We believe that too often financial operators treat social economy organisations as high-risk simply because they use tools that are commonly employed to assess other kinds of enterprises”.

Social impact investments should meet the following criteria:

• have a clear goal to create social impact;
• support enterprises that are clearly defined as social economy enterprises;
• set levels of expectation based on fair, sustainable and transparent economic returns, even if lower than market average;
• allow part of the assets to be reinvested in other investments with social goals;
• have a measurable impact;
• be consistent with the values of the enterprise in which they invest.

Sound mutual knowledge is essential to bridging the investment gap.  "Financial actors need to be better supported to understand the realities of social enterprises, and to help the latter understand the world and the instruments of finance", says co-rapporteur Marie Pierre le Breton.

Dissemination of good practices, such as Finland’s Centre of Expertise for Impact Investment, or France's "pay-by-results" investment models, can also help. However, EU-wide indicators must be established to assess impact. These could be objective indicators, such as jobs created, or subjective ones, such as community wellbeing. (dm)