Social Impact Investing

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Social Impact Investing French experience in a global context Guilhem Dupuy | Helsinki | 10/06/2015

Transcript of Social Impact Investing

Page 1: Social Impact Investing

Social Impact InvestingFrench experience in a global context

Guilhem Dupuy | Helsinki | 10/06/2015

Page 2: Social Impact Investing

Guilhem Dupuy – June 2015

Social Investment Taskforce established by the G8 : general organisation

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Impa

ct In

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men

t: T

he in

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hear

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mar

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–Re

port

of

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Soci

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men

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kfor

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> 15 reports released in September 2015

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Guilhem Dupuy – June 2015

Social Investment Taskforce established by the G8 : political agenda

“The world is on the brink of a revolution on how we solve society’s toughest

problems. The force capable of driving this revolution is ‘social impact investing’, which

harnesses entrepreneurship, innovation and capital to power social improvement”

“Despite their different models for tackling social and environmental challenges,

governments everywhere are under ever greater pressure to make meaningful progress

in tackling the social problems facing their countries. All of the countries on the

Taskforce also face growing pressure, in a context of fiscal restraint, to allocate

government spending more efficiently and effectively to social needs.”

“Impact investing does not relieve governments of their responsibilities. But it can help

to fulfil them more effectively. By financing innovative approaches, impact investing

also has the potential to help deliver services more efficiently and, in some cases, tackle

the underlying causes of growing demand for social services instead of just trying to

cope with their consequences.”

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Guilhem Dupuy – June 2015

Social Investment Taskforce established by the G8 : main global recommendations

1. Set measurable impact objectives and track their measurement

2. Investors to consider three dimensions: risk, return and impact

3. Clarify fiduciary responsibilities of trustees: to allow trustees to consider social as well as financial return on their investments

4. Pay for success commissioning: governments should consider streamlining pay-for-success arrangements such as social impact bonds and adapting national ecosystems to support impact investment

5. Consider setting up an impact investment wholesaler funded with unclaimed assets to drive development of the impact investment sector

6. Boost social sector organisational capacity: governments and foundations to consider establishing capacity-building grants programmes

7. "Give Profit-with-Purpose businesses the ability to lock-in missions: governments to provide appropriate legal forms or provisions for entrepreneurs and investors who wish to secure social mission into the future"

8. Support impact investment's role in international development: governments to consider providing their development finance institutions with flexibility to increase impact investment efforts.

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Social Investment Taskforce established by the G8 : what are we up to ?

Significant progress across the world, National Advisory Boards engaged

in constructive discussions with governments

Renewed support from the European Commission

Social Impact Bonds are spreading, mostly in UK, US and Australia.

Experiment are going on elsewhere.

Milestone bills passed / under way : Japan on unclaimed assets, Italian

Social Enterprises Bill, French Social Sector Bill…

Increasingly deep understanding of impact investing in many countries

across all continents

August 1st 2015 : official launch of the Global Steering Committee on

Impact Investment (GSCII), set up for an initial period of 3 years

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Reframing the global debate in our own language -What impact investing means in a strong welfare State

G8 Taskforce focus on “efficiency” of social service providing

Strong, legitimate, popular welfare States in Northern & Continental Europe, as

well as longstanding social sectors with specific traditions

To some extent, the potential market size of impact investing in these countries is

highly (and negatively) correlated to how efficient a nation thinks its welfare

system is

In France in particular, the debate has been framed through 3 structural ideas:

Impact Investing is by no means an alternative to welfare state and public spending

Under specific circumstances, impact investing may provide additional funding to

organisations with already hybrid (public/private) balance sheets

Impact investing may foster autonomous fields of social innovation for the public

sector to get inspiration from in the long run

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What are the investable organizations ?Framing the definition issue

In France as in most countries, 2 specific groups of organizations are potentially qualifying for social impact investments

• “Social sector organisations”• “Social and solidarity economy”• “Non-profit organisations”• “Third sector”• “Civil society”

• “Profit-with-purpose businesses”• “Mission-driven companies”• “For-profit social enterprises”

Statuses and low profitabilitytranslating values

Emphasis on mission

Which ones are actually“investable” ?> A significant amount of social organisations across the world cannot take equity, or even access private funding

Where to find them ?

> Most of them are not (yet) registeredto a representative group or federation

Do they actually providesignificant social impact ?

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Salient points in the French contextHistoric co-construction of social service providing between Public and Social sectors

Industry2%

Retail3% Transports

1%

Financial activities

12% B2B Services

4%

Education16%

Health8%

Social37%

Culture2%

Sports & Leisure

4%

Administration

10%

Transports4%

B2B Services

7%

Education22%

Health18%Social

6%Culture1%

Administration39%

7.9%10.5%

19.8%21.4%

24.7%34.6%

64.6%

82.3%67.1%

75.6%22.5%

3.7%3.0%

28.7%

9.8%22.4%

4.6%56.1%

71.6%62.4%

6.7%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

AdministrationHealth

EducationCulture

Sports & LeisureFinancial activities

Social

Social sector Public sector Private sector

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CN

CRE

SS –

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l’Ec

onom

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009

(200

6 D

ata)

Share of activities in the Social sector vs(relative share in total employment)

Share of activities in the Public sector

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The French social investment ecosystem in a nutshell

Statutory sector : key figures• 222 800 organisations• 2.4m jobs (2012)• 10 % of the French GDP (200 bn€)• +23% growth in jobs in the last

decade

Social Enterprises

For-Profit Non-Profit

Mutual insurance Companies

Mutual insurance Companies

AssociationsAssociations

Work integration social enterprises

EI, ETTIEI, ETTI AI, ACIAI, ACI

Work integration social enterprises

EI, ETTI AI, ACI

EAEA ESATESATEA ESAT

FoundationsFoundations

New social cooperativesNew social cooperatives

Commercial companies(mission-driven, etc.)

Commercial companies(mission-driven, etc.)

Social & Cooperative Banks

Government agencies, specialist financial

institutions

Fund Managers, Private Equity firms

Tax Advantaged funds, employee savings

Traditional Banks

Social Investment Networks

Crowdfunding Platforms

Public funding

High Net Worth Individuals, Family Offices

Institutional Investors

Mass Retail

Foundations

Corporates

Mat

ure

stag

eEa

rly s

tage

Channels of capitalInvestors

Organisations adapted for the disabled

Gro

wth

sta

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Investors and investment funds -Where does impact investment come from ?

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Historically a strong source of capital, though not likely to grow extensively in the coming years

Widespread fiscal incentives, through multiple tax advantages, state supported working contracts, etc.

Public financing agencies, alongside their European counterparts, are strongly supporting social impact investments funds and vehicles through co-investments

Regional and local authorities play a major role as financing partners in several social sectors : associations (subsidies and service procurement), local social investment networks, microfinance (e.g. Crédit Municipal), social housing, etc.

Public funding

Several investors clubs (national or local) dedicated to direct investments into social enterprises (e.g. Cigales, Garrigue)

Growing interest for venture philanthropy and social finance from family offices

High Net Worth Individuals, Family

Offices

Institutional investors (except for public ones) are still cautious about impact investing, due to a perceived mismatch between high risks and relatively low returns, while increasingly subscribing socially responsible investment funds : €107.2bn in 2012, 72% of French SRI total assets

Growing interest in risk-adjusted (“90/10”) solidarity funds, and impact venture capital to a certain extent

Institutional Investors

Employee savings plans and company pension funds (PEE, PERCO…) now account for a significant part in social economy funding. Solidarity-based assets have grown by an outstanding 588% between 2007 and 2014 (now €6.82bn).

Mass Retail

To foundations, adding “meaning” to the management of their assets is a growing concern – around 10% (€1.5bn) should be allocated to social investment in the next years, provided relevant legal evolutionsFoundations

Several large companies have launched dedicated social investment funds over the last years : Danone, EDF, Renault, Schneider, Veolia…

Most of the time these funds are linked to the companies’ employee savings plans.

Corporate Foundations : 291% growth between 2001 and 2010 (from 67 to 262)

Corporates

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Bringing mass retail to impact investing:the French “90/10” funds

The 2001 “Fabius” law instituted employee savings schemes, and mandated that a category of a

given company’s employee savings schemes included the option to contribute to a “90/10 solidarity

fund”. The scheme was later extended in 2008.

A 90/10 fund invest between 5% and 10% of its assets into unlisted “solidarity designed”

organizations. The other 90-95% of assets remain classic, listed securities (such as equity, fixed-

income, sovereign bonds, etc.).

French solidarity-based retail assets (m€)

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2007 2008 2009 2010 2011 2012 2013 2014

Corporate solidarity employee-savings funds

Open-ended funds and banksavings accounts

Direct investment

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French “90/10” funds : a success story

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2007 2008 2009 2010 2011 2012 2013 2014

Total householdfinancial savings

Total solidaritysavings

Solidarityemployee-savings90/10 funds

Growth of solidarity-based assets relative toglobal financial assets (2007 = 100)

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Banq

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, Fin

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Solidarity bank savings products gained significant traction lately (+17% growth yoy, to €2.2bn)

Virtuous cycle in demand-side, initiated by the 2001 & 2008 laws related to supply-side

Room for growth : solidarity-based assets amount to … 0.16% of global household financial

savings

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Solidarity savings… for what purpose ?

Environment37%

Employment22%

Housing31%

International solidarity

5%

Other5%

Work integration

social enterprises

48%Social inclusion /

Social housing29%

International development

12%

Environment11%

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Fina

nsol

How many social enterprises in France ? Estimates range from 15.000 to 50.000

Uses of solidarity-based savings by impact sector (2013) :

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Ecof

i Inv

estis

sem

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Breakdown of Ecofi’s solidarity-based investments (2014) :

Page 14: Social Impact Investing

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Thank you for your attention !

Questions ?

[email protected]