Home Insights & Advice N’Gunu Tiny on how the EU is leading the way for financing social innovation

N’Gunu Tiny on how the EU is leading the way for financing social innovation

by John Saunders
5th Jan 21 4:16 pm

N’Gunu Tiny, Founder and Executive Chairman of the Emerald Group is an expert in transformative tech and social innovation.

One of the biggest challenges facing global Governments goes beyond COVID-19. The pandemic has thrown into sharp relief the inequality and fragile infrastructures in many developing countries. But it’s also highlighted the fragility of every country’s ability to respond to unprecedented crises.

Currently, countries in Europe and North America in particular, are struggling with a sharp rise in COVID-19 cases. And while various vaccinations are at the very beginning of their roll out, new strains of the virus are causing major concern. Pandemic-related issues are piling on top of the ever-increasing impact of climate change, social political crises, rising poverty, and ageing population and much more.

Dealing with these myriad challenges is predicated on financing social innovation and impact investment. Without a cohesive effort from private business, mainstream investors, Governments and lawmakers, humanity will face insurmountable challenges. Finance and funding aren’t the only thing that’s needed, there’s an urgent need for a sea-change in education, understanding and knowledge too.

Here’s how the European Union (EU) is playing a crucial role in accelerating social innovation.

The EU leads in financing social innovation with a raft of initiatives

As we head into 2021, financing social innovation and positive ways to deal with the challenges facing the world is more important than ever. And in times of great disruption, new business opportunities inevitably arise. The EU has identified social innovation as the most important transformative trend.

The overall objectives for the European Commission (EC), which is the legislative branch of the EU, are to support the uptake of social innovations solutions, stimulate employment and work towards a post-pandemic future. And the EU has been leading in social innovation since 2010 when it first launched the Innovation Union initiative. Three years later they added the Social Investment Package (2013).

These initiatives and subsequent amendments aim to:

  1. Share best practice and information about social innovation across Europe.
  2. Promote social innovation as a source for jobs and economic growth.
  3. Support innovative entrepreneurs by mobilising public organisations and investors.

To achieve this the EC:

Recent fund launch closes finance gap for early stage social enterprises

Most recently, they launched the European Social Innovation and Impact Fund (ESIFF). This innovative fund aims support the increase in social innovation and to close the financing gap for early-stage social enterprises in Europe. The fund is partially secured by a guarantee from the European Investment fund (EIF).

The ESIFF will straight away boost impact investing in the EU, and in a very short time this alternative investment fund (AIF) attracted 4.5 million Euros. This is an important bridge between the collective attitude in favour of social enterprises and getting actual funding to early-stage ventures.

Globally, the infrastructure for social investment is embryonic, and 2020’s plans have been interrupted by the pandemic. But EU programmes like this build on the early-stage framework to get financial support to those who need it – the social innovators, entrepreneurs and start-ups that are tackling these hugely important issues.

The AIF is aimed at professional and semi-professional investors specifically from Germany, with a target fund volume of 20 million Euros. Businesses that will benefit include approximately 60 social enterprises across health, the environment, education and social services.

Some of the EU funding initiatives in place

Individual and corporate investors are increasingly seeking these kinds of opportunities. Funding social innovations in an impactful way is the future for mainstream investment. The following initiatives and funds form part of the EU objectives that support research and development, growth, employment, entrepreneurship and social innovation:

  • European Investment Fund (EIF)

The EIF forms part of the wider European Investment Bank Group and aims to help micro businesses and small and medium sized enterprises (SMEs) access finance.

  • Programme for Employment and Social Innovation (EaSI)

Through the EaSI, the EU has funded social enterprises to the tune of 193 million Euros between 2014 and 2020 through microcredit. The focus is on loans of up to 25,000 Euros, particularly for socially vulnerable initiatives and micro-enterprises. The EIF implements the EaSI guarantee, which allows social enterprise investors and microcredit lenders to help the types of companies they would usually avoid due to the high risk involved.

  • Financing Agency for Social Entrepreneurship (FASE)

Since 2013, the FASE has been boosting the growth of social innovation across Europe, and the funding of social enterprises. The agency connects impact investors with the kinds of social enterprises that are full of potential but struggle to find funding. They also offer financing advice and provide a structure for transaction processes. So far, the FASE has facilitated more than 25 million Euros in impact investment.

The executive arm of the EU, the European Commission (EC), also provides funding for social innovation projects through the following:

  • European Social Fund (ESF)

The EC sets the funding priorities for the ESF, but don’t choose the successful projects. Funding is available for initiatives that aim to assist people improve their prospects of getting a job. Open to both public and private organisations, ESF funding is applied for by contacting the relevant authorities in each country.

  • European Globalisation Adjustment Fund (EGF)

This fund is for people who have been made redundant due to changing global circumstances. Companies or individuals who are dealing with redundancy can apply for funding through their country’s national authority.

Financing social innovation in Europe and the rest of the world must now be boosted by Governments in all sectors and across all stages of development. The world remains in the middle of a health crisis, with huge economic impact. The associated issues with poverty, hunger, homelessness, access to jobs, money and much more must now take centre stage.

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