EUR-Lex Access to European Union law

Back to EUR-Lex homepage

This document is an excerpt from the EUR-Lex website

Document 52014IE3794

Opinion of the European Economic and Social Committee on ‘Social Impact Investment’ (own-initiative opinion)

OJ C 458, 19.12.2014, p. 14–18 (BG, ES, CS, DA, DE, ET, EL, EN, FR, HR, IT, LV, LT, HU, MT, NL, PL, PT, RO, SK, SL, FI, SV)



Official Journal of the European Union

C 458/14

Opinion of the European Economic and Social Committee on ‘Social Impact Investment’

(own-initiative opinion)

(2014/C 458/03)


Ariane Rodert

On 5 June 2014, the European Economic and Social Committee, acting under Rule 29(2) of its Rules of Procedure, decided to draw up an opinion on

Social Impact Investment

(own-initiative opinion).

On 3 June 2014 the Committee Bureau instructed the Section for the Single Market, Production and Consumption to prepare the Committee's work on the subject.

Given the urgent nature of the work, the European Economic and Social Committee appointed Ms Rodert as rapporteur-general at its 501st plenary session, held on 10 and 11 September 2014 (meeting of 11 September 2014), and adopted the following opinion by 176 votes to 37 with 19 abstentions.

1.   Conclusions and recommendations


The EESC welcomes the interest in social impact investment but stresses that it should be seen in the context of the Social Investment Package (SIP) and the Social Business Initiative (SBI).


The EESC considers that social impact investment is about combining different cross-sectoral resources to create social impact and that it is one component in the social financial ecosystem.


Social impact investment should not aim to replace the public responsibility of financing core activities in the social sector, but can rather complement other funding streams. The EESC supports the debate taking place at the Commission on excluding social investments from the calculation of net government deficits under the EMU's fiscal rules, in line with the financial ‘golden rule’.


Recognising that access to finance is a general concern for all SMEs, tailored financial ecosystems should be developed to suit the various enterprise models. However, the EESC stresses that social impact investment is not CSR-aimed, but rather aimed at investing in social enterprises as per the SBI definition.


When measuring social impact as part of the return on investment, the EESC urges stakeholders to build on the work done and principles set out already by the Commission and EESC in this field, rather than inventing new methods.


It is the EESC's view that the best models for social impact investment are hybrid capital solutions, such as patient blended capital, often with a guaranteed element. The Commission should explore the broad financial ecosystem of innovative instruments that is now emerging and review its potentially positive effect on capital provision for social economy enterprises and social policy innovation.


When developing new investment instruments, the specificities of social enterprises must be considered, this to ensure access to high-quality services and continuity of services.


Since the social economy and social enterprises are underdeveloped in many Member States, developing a social investment market is secondary to the full implementation of the SBI at national level, which consists of equally important actions such as capacity building, recognition and visibility.


Social economy enterprises are closely connected to the civil society sector. Recognising and safeguarding the work in this sector as well as the specific models within the social economy are crucial to create the much needed trusting and innovative partnerships between sectors.

2.   Introduction


Europe is recovering much too slowly from an unprecedented crisis and faces significant societal challenges calling for social innovation, structural change and stable and sustainable welfare systems. This requires the mobilisation of all stakeholders and resources in society to create new sustainable solutions to support and improve the social situation in Europe.


In this context, the Commission's Social Investment Package (SIP) (1) highlights the importance of well-designed welfare systems in which social enterprises and social entrepreneurs (2) are supported as pioneers of change and innovation to complement public sector efforts.


Further, the Commission's Social Business Initiative (SBI) (3) prioritises the creation of a favourable environment to grow and develop social enterprises and the social economy in Europe. The EESC has provided specific expertise in this field over the years (4). Both these EU policy frameworks clearly identify social economy enterprises' need for better access to tailored finance, an issue they share with SMEs generally.


Moreover, there is increasing interest amongst investors in combining social or environmental benefits with a financial return on investment (5). In June 2013, the Social Impact Investment Taskforce (6) was created at the G8 Social Impact Investment Forum, which aims to catalyse the development of a social impact investment market. This taskforce is currently working on a report with recommendations to be published in September 2014.


This opinion explores the perspective of social economy enterprises and social impact investment since they are well placed to tackle social needs and complement public efforts to strengthen social policies. It adds to the Social Impact Investment Taskforce's work but also aims to feed into the broader discussion about access to finance for social economy enterprises.

3.   Social impact investment


The EESC welcomes the interest in social impact investment but stresses that it should be seen in the context of the SIP and SBI and should focus on supporting social innovation to tackle social needs rather than generating financial revenue. The EESC recommends that the common starting point must be social need, then identifying the best solutions and, as a third step, how best to finance the intervention.


The EESC considers that social impact investment is about combining different cross-sectoral resources: public, private and social economy with the aim to creating social impact. With this view, social impact investment is one component in the social financial ecosystem.


However, since this is an emerging field, the EESC urges the various stakeholders not to define this field too quickly or too narrowly, rather to identify common characteristics and monitor how this field emerges in the Member States. It is crucial that private social investment should not aim to replace public responsibility for financing core activities in the social sector based on social laws and legal rights.


Interest in social impact investment is a fact but is still new and developing. A first challenge is to describe the concept and the intended investment targets. In the current G8 discussion, social enterprises are the main target, with several ‘sub-set’ investment targets emerging. These have varying combinations of social and profit missions: as a main activity (social enterprises — social-purpose-driven) or a side activity (SME — profit with social purpose). It is worth noting that even if social enterprises have their specific nature they are still a normal part of the economy.


Given that many enterprises today may have some social or environmental engagement they cannot all be classified as social enterprises. Some enterprises undertake corporate social responsibility (CSR), which the Commission defines as the responsibility of business for its impact on society and the environment (7), an activity by mainstream profit-seeking businesses, which is voluntary.


Therefore, the EESC stresses that any initiatives in this area must adhere to the SBI description of a social enterprise, since it captures the diverse models of social enterprise in the Member States. According to the SBI, a social enterprise is ‘an operator in the social economy whose main objective is to have a social impact rather than make a profit for their owners or shareholders’, and fulfils three main criteria (8).


With this in mind the EESC believes that it is crucial to provide tailored financial ecosystems with a wide variety of instruments, models and products for all diverse models and structures, ranging from socially responsible businesses to social economy enterprises for social action, whilst bearing in mind that they are not always the same. Even if social impact investment initiatives are mainly aimed at the latter, it must be noted that SMEs share similar concerns in terms of access to finance, which also need to be addressed in full.


In the EESC's view, social innovation financing must include the full range of funding sources — from grants to investments — with different expectations of return, taking into account the existing business models of social entrepreneurs. This is in contrast with the most commonly used description by the GIIN (9), which says that ‘Impact investments are investments made into companies, organisations, and funds with the intention to generate a measurable, beneficial social and environmental impact alongside a financial return’. From the EESC's perspective, this definition does not capture the variety of social investment that already exists and ought to develop, nor its aim of identifying new sources of finance for social progress. It primarily considers social investment from a private investor's point of view, lacking the connection to social policy innovation.


A crucial part of social impact investment is the measurement of the social impact resulting from the intervention. Referring to the EESC opinion on social impact measurement (10), the EESC argues that social impact measurement should support the social mission, be proportionate, and recognise that impact can be measured in a number of different ways depending on the enterprise's activities. Similar principles are stated in the GECES sub-group report adopted in June 2014 (11). Here the EESC urges the Member States and relevant stakeholders to build on this European work and practices rather than inventing new methods. Moreover, any further rules developed to support the European Social Entrepreneurship Fund (EuSEF) should be proportionate and reflect the needs and limited resources of the social enterprises being invested in.

4.   The social enterprise perspective


To unleash fully the potential in the social economy enterprise sector there is a need for an inter-connected financial ecosystem built from the existing ethical and alternative financial system, rather than applying mainstream financial instruments and logic focusing primarily on the investors’ perspective.


As expressed in a previous EESC opinion (12), there is a risk that social investment designed as equity instruments will be difficult for many social economy enterprises to access, since ownership and control may be incompatible with the models, values and legal forms of social economy enterprises.


It is therefore the EESC's view that social impact investment should encourage hybrid capital solutions. This blended capital model combines grants with long-term, ‘patient’ loans and similar where durability and long-term nature are underwritten by public ownership or guarantees.


The EESC calls on the Commission, as a first step in this emerging field, to facilitate best practice policy experiences associated to the various models of social impact investment and financing that are now developing. This review could evaluate the opportunities and challenges of specific instruments and forms of capital and their providers, such as the currently discussed Social Impact Bonds (13), Community Reinvestment Acts or the Italian Social Bonds (14).


Since, for the time being, these innovative financial instruments primarily appear at local, regional and national level, there is limited cross-border interest. The EESC therefore believes that the EU does not need to provide further stimulus for an European social impact investment market at this point.


Other specific features of social enterprises must also be considered in the context of social impact investment. Issues to consider include divestment, long-term rather than short-term investment, effect on continuity of service provision, impact on social enterprises' social mission, etc.


Incentives, such as tax incentives, should also be examined more closely as one element of the revenue model, as should the question of how to balance the incentives given to investors against their expected market return. Returns should not be allowed to be higher than the current market rate of return when public funds or incentives are involved. The Commission should review types of capital incentive and the financial and/or social return in the Member States. It may be useful to invite pension funds to consider such investments as part of a diversified portfolio.


It is also important that the Commission monitor the progress of social impact investment on a regular basis to ensure that the main target groups of social enterprises and of the social economy do actually have greater access to appropriate capital.

5.   Further considerations on social impact investment and the policy framework


Given the importance of access to suitable finance throughout an enterprise's life cycle, any developments must take place within a policy framework for social finance and investment that supports the social enterprise sector at Member State level, thus avoiding some Member States' exploring individual instruments instead of creating a broad policy framework.


It is equally important that all types of investors — public, private and civil society — should be considered, whilst taking into account their individual motives and expectations to ensure the best partnerships and results. But most importantly, the construction of an impact investment infrastructure has to influence positively welfare models in Europe. Policy should be carefully shaped within the national context with the aim of having social enterprises and the public sector mutually strengthen welfare systems whilst ensuring universal access to quality and affordable services.


In this context, the government plays a central role as a ‘buyer’ of social impact but primarily as the key responsible of guaranteeing social rights. Initiatives for a social investment market must originate from the perspective of achieving a positive social impact for the common good, and not for the government to withdraw from its obligation to deliver social policy, social security and social services.


The EESC supports the debate taking place at the Commission on excluding social investments from the calculation of net government deficits under the EMU's fiscal rules, in line with the financial ‘golden rule’ (15).


The EESC opinion on the Social Investment Package and related work (16) should be considered in this context, calling for innovative financing recognising that well-planned, effective and efficient social investment will maximise social effects and that welfare state investments bring social progress and reduce future social cost.


Investing in social enterprises is particularly complex since the services provided often involve people in need. The success of the interventions relies on resources, the flexibility to adapt to changing condition and ensuring continuity of services. Applying a traditional investment and market logic in this field requires careful thinking to avoid negatively impacting the key target group, the end-user.


Social impact investment must also be explored in the wider context of financing such as public procurement and contracting. Social impact investment for innovation requires a different relationship relying on an equal partnership between the stakeholders where the public authorities are central.


Since the social enterprise sector still is underdeveloped in many countries, any initiative in the field of social impact investment must be carefully considered. A social investment market requires supply and demand, and therefore a well-established social enterprise sector. Developing an investment market is only secondary to establishing a sustainable social enterprise sector.


In this context, it is also important to mention that social enterprises emerge within a civil society context. Supporting an independent and sustainable civil society is therefore crucial to the development of social enterprises, as is dialogue with the social economy at all stages.


Even if a supply of suitable finance (social impact investment or other) is available, this market will not fully function without capacity building in social impact measurement and investment readiness programmes. The emergence of providers of these capacity building services, who are often social enterprises themselves, should be encouraged. There is also a need to create interfaces between social enterprises and the social investment world, with special intermediaries playing a central role. However, the EESC warns against adding too many intermediary levels or large-scale actors since true social innovation partnerships rely on direct and close contact between stakeholders (often small and local) to build trust, and do not do this via brokers.


The EESC underlines the importance of clearly distinguishing between the social impact of a social enterprise as such and the social impact generated through a specific activity or programme of the enterprise. Social enterprises should always respect labour law, workers' rights and relevant collective agreements.


Supporting the social economy and social enterprises requires a holistic view of where great ideas come from, who drives them, and how they grow. Each of these questions challenges governments and private investors to think outside the box of providing investment capital to realise the full potential of the social enterprise sector and society. Besides access to finance, other key components are required to create an enabling environment for the social enterprise sector in Europe. The EESC therefore urges the Member States to take advantage of the provisions available in the context of the SBI and develop national support plans for the sector, and calls on the Commission to assign a lead unit to develop a second phase of the SBI for the coming years.

Brussels, 11 September 2014.

The President of the European Economic and Social Committee


(1)  COM(2013) 83 final.

(2)  The social economy, also referred to as the ‘third sector’, refers to non-government actors such as community organisations, voluntary organisations, and social enterprises that undertake activities for social benefit. Social enterprises are businesses with primarily social objectives, and whose surpluses are usually reinvested into the business or in the community rather than distributed as profits to owners and shareholders.

(3)  COM(2011) 682 final.

(4)  OJ C 318, 23.12.2009, p. 22, OJ C 24, 28.1.2012, p. 1, OJ C 229, 31.7.2012, p. 44, OJ C 229, 31.7.2012, p. 55, and OJ C 170, 5.6.2014, p. 18.

(5)  This interest includes private investors ranging from venture capital providers to pension funds, foundations and public and private banks, as well as networks such as TONIIC, EVPA and the Ashoka Support Network.



(8)  COM(2011) 682 final, p. 2.

(9)  Definition of the Global Impact Investment Network,

(10)  OJ C 170, 5.6.2014, p. 18.


(12)  OJ C 229, 31.7.2012, p. 55.



(15)  OJ C 226, 16.07.2014, p. 21.

(16)  OJ C 271, 19.9.2013, p. 91 and OJ C 226, 16.7.2014, p. 21.