Social impact through investment, NRP and European funds.

Social impact and impact finance: resources and analysis to understand what they are and how to achieve them through the NRP and European funds.

A new insight into impact finance

We have already devoted space to the link between economics, finance, social impact and European funds, presenting some in-depth guides , the new Action Plan of the European Commission and the main European funds and programs referred to this area. To pick up the thread of the topic, let us recall some typical concepts in this area, which are interrelated but distinct.

The concept of social economy includes all activities that are aimed-rather than at profit-at seeking a positive impact on society and the community. L’social innovation is instead the area in which approaches to addressing important social needs emerge and are tested, creating new forms of organization and collaboration. Social economy enterprises are thus an expression of-but also the bearers of-social innovation.

The social finance, the social impact finance or more simply the impact finance o impact investing is the more specifically financial domain of the social economy, which uses investment and capital to combine economic returns with positive social impacts. Impact finance uses a variety of tools: tools called of debt such as bonds and bonds (in which financing is repaid with interest) and instruments called of equity such as venture capital e private equity (in which the financing represents an entry into the capital of the company).

To further explore and contextualize this concept, we recommend one of the first and most important Italian reports on the subject , which traces state of the art and perspectives of impact investing in our country.

The link between impact investing and European funds

The theme of impact investing is very relevant in the field of philanthropy (of which impact investing represents one of the most promising forms of intervention) and is central in one of its most modern declinations (the so-called venture philanthropy ).

In addition, the theme of impact investing has a double connection with the European funds:

• A substantial link, because the concept of “investment” represents the heart of both the Structural Funds (whose full name is “European Structural and Investment Funds”-sometimes shortened to “EIS Funds”) and of the Recovery and Resilience Facility (of which the investments represent the main form of intervention);
• A conceptual link, because the concept of “impact” is central to all European projects, which are called upon to contribute (in a measurable way) to an overall objective, which defines precisely the impact of the project; and to produce (in an equally measurable way) behavioral and institutional changes, which define the specific objective.

The PNRR and the Recovery Facility constitute a “change of pace” from both points of view, as: 1) they are largely based on the realization of investments, whose resources are drawn through the creation of “bonds” communities and are partly given to the member states in the form of loans; 2) the overall reporting of their resources is not based on expenditures made, but on the results attainments.

The association between financial instruments, social impact and European projects, however, is more generally and has always been quite natural. European funds and programs are in fact a investment made by European institutions to achieve a social impact (also defined, in this specific area, in terms of “ community added value “). Consequently, each European project must represent (and be conceived as) a concrete proposal for achieving social impact.

The role of Social Impact Agenda for Italy

In Italy there is a specific network dedicated to impact finance, called the Social Impact Agenda for Italy (or “SIA” for short). The SIA “brings together investors, social enterprises, market builders, and philanthropic institutions to realize a new economy, one that can combine economic sustainability with positive social and environmental impact“. It “ represents the Italian Advisory Board of the Global Steering Group for Impact Investment (GSG), an independent organization, spread across 33 countries, committed to promoting and accelerating the spread of impact investing globally “.

His brochure explains its mission and effectively clarifies, with diagrams and examples, the most important concepts related to impact finance. Which is not only an area of expansion or potential, but also a new economic paradigm.

Social Impact Agenda for Italy proposes publications , position papers e webinars ( including one devoted to the link between impact finance and NRP). The content he develops and publishes on his website is a useful source of information on this topic: we analyze some of them below, those most relevant to the field of europlanning.

Impact Investing and EU Funds: a thematic review

1. Designing social innovation: impact investing and EU funds

   This position paper provides a definition of the field and discusses its history, prospects and some case studies in Italy. Then presents the evolution of European policies in the area of social innovation and the social investment , the link between these issues and European funding lines, and some experiences (such as this ) of joint use of European funds and social innovation tools. He then anticipates some of the novelties in this programming period regarding social innovation. , with special reference to the InvestEU program and the introduction of results-based forms of financing.

2. NRP and Impact Investing: challenges and opportunities Presented in early 2022 (when the structure of the NRP was being outlined) and intended for policymakers, actors in finance and social entrepreneurship, this publication identifies concrete insights and initiatives for activating Impact Investing policies and actions enhancing social impact as part of the implementation of the NRP. Places emphasis on the importance of mechanisms “ Pay-by-Result” , on the experience gained in this regard by the impact investment , on the role of social enterprises, and on the synergy between different funds and financial instruments.
3. Welfare and social sustainability: from a more social Europe to the NRP, an opportunity to improve systems of care and proximity This publication picks up on some of the concepts of the previously mentioned papers and reminds us that the NRP is a great opportunity to innovate the Italian welfare system. It reviews the main points of European policies and funds in the welfare sector and considers how measures financed by the NRP (including the implementation of community hospitals and health homes) provide an ideal area in which to activate synergies with the social economy and social impact investments.
4. NRP, EU funding “not linked to transaction costs,” and Social Impact Bond This publication highlights how the Recovery Facility and NRP require results-based rationale, planning, management and reporting of investments. The results are the basis for funding by the “ facility ” (procedure “ performance-based ” and not simply “ compliance-based “). The paper draws parallels between this aspect of the NRP, the Structural Funds (whose Regulations urge a similar approach, through the notion of “funding not linked to the costs of operations”), and the instruments of impact investing such as the Social Impact Bonds (which are based on the concept of impact and outcome). Finally, it proposes greater participation of social economy actors in NRP interventions.
5. Testing Social Impact Bonds: challenges, opportunities and possible applications in light of the NRP

   This publication analyzes whether and how the experience of the Social Impact Bonds can be tested and replicated and within the NRP. He provides an affirmative answer, emphasizing how impact assessment methods and leverage given by private capital, typical aspects of impact finance, can accelerate the transformations advocated by the NRP. The study analyzes the synergies, potentials and risks of the impact finance and the Social Impact Bonds (with some European case studies), providing options and recommendations for testing this tool in the PNRR framework.

Even with all the slowdowns induced by the current political situation, the NRP remains a unique opportunity for Italy: it is an innovative tool for which it is correct and necessary to evaluate innovative methodologies, such as impact finance.

The same methodologies have points of contact with European funds and can be an important source of inspiration and funding for all actors orbiting the nonprofit and social sector-we hope this review will help bring new ideas and new perspectives to their activities.