The Council of Europe Development Bank identifies five projects to receive financing in the areas of affordable social housing, education and training, microfinance and social enterprise finance.
InvestEU, the EU’s funding programme for sustainable investment, innovation and job creation, has announced it has approved a new budget guarantee of €80m for five projects financed by the Council of Europe Development Bank (CEB), Europe’s social development bank, in the areas of affordable social housing, education and training, microfinance and social enterprise finance.
The news follows an InvestEU guarantee agreement, signed between the European Commission and the CEB in November last year, which made the CEB an InvestEU implementing partner. The guarantee agreement, worth up to €159m, was hailed as an important milestone at the time for mobilising around €500m in loans for social projects in addition to CEB’s existing loan portfolio.
This latest guarantee is expected to mobilise €252.5m of CEB financing (part of the €500m), €100m of which has been ringfenced to provide microfinance and support social economy organisations across the entire EU.
The other four loans include €20m for the Social Finance Foundation established by the Irish Government to finance community and voluntary organisations and social enterprises, mainly located in rural areas; €13.5m for the Fondation Apprentis d’Auteuil, which provides social assistance and child protection services in France and will use the funds for the renovation and expansion of its Saint-Philippe education campus in Meudon, in the Hauts-de-Seine region bordering Paris; €100m for Institut Català de Finances, a public finance institution run by the Catalonian Government in Spain, for the acquisition and construction of affordable social housing; and €19m for Fundació Pere Tarrés, a Spanish non-profit focused on education and social action, to construct a new building in Barcelona which will provide education and training for social workers and disadvantaged children and youth.
Asked how these individual projects were chosen, Jasmina Glisovic, head of grant operations and new instruments for CEB, explained CEB worked with its regular and established contacts with public authorities, financial intermediaries, and the private sector to identify potential projects.
“CEB accompanies counterparties throughout the life-cycle of the project, providing technical expertise on the structuring of the project, sharing best practice, and checking that the necessary technical and financial capacities are in place for the project to take place,” Glisovic said. “The bank is able to provide additional support in the form of external technical assistance, including through the InvestEU Advisory Hub, for project preparation and to accompany implementation if needed and justified.”
Investing in the EU’s social economy
Speaking to Impact Investor Veerle Nuyts, spokesperson for economic and financial affairs, jobs and social rights at the European Commission, said the social economy was a key sector for inclusive and sustainable growth and job creation, employing 13.6 million people in the EU and offering “concrete and innovative solutions to key societal challenges”.
“They create and retain quality jobs, contribute to the inclusion of disadvantaged groups, drive sustainable economic development and promote the active participation of citizens in our societies,” she said.
Glisovic echoed Nuyts’s sentiments highlighting the considerable potential of investments through microfinance and other social economy organisations to support the integration of under-represented and vulnerable groups including the unemployed, women, young people, migrants, people with disabilities or those facing barriers to accessibility, people experiencing social exclusion, and rural populations.
“With deep-rooted traditions across Europe, social economy organisations play a pivotal role in promoting social cohesion and supporting vulnerable groups. These organizations often pursue a triple bottom line of social, environmental and financial sustainability,” said Glisovic.
The budget guarantees offered by InvestEU, which cover around a third of the loans, allow its implementing partners to improve the financing conditions offered through the loans as well as to invest in higher risk innovative projects, encouraging further and much needed investment in the social economy from other private and public sector sources. According to an EU source, in most cases, the guarantees are not called.
Limited access to financing
According to Nuyts access to finance has and continues to be one of the key structural challenges for social enterprises, with the availability of funding, notably of repayable financial resources, for social enterprises varying across member states.
“This is why during the 2014-2020 period, the financial instruments under the EU Programme for Employment and Social Innovation (EaSI) supported social enterprises through loan portfolio guarantees, equity and debt financing,” she said, adding that support has and will continue over 2021-27, through the InvestEU Social Investment and Skills window, a dedicated policy area with a budget of €26.2bn to develop skills and key competences through education and training across the EU. This also includes support for projects involving social innovation, health services, ageing and long-term care, access to prevention, innovative treatments and e-health options, inclusion and accessibility, and cultural and creative activities with a social goal.
Glisovic added that despite growth in the size of the EU’s social economy in recent decades, job-creation and social-value-added potential remained constrained by the lack of financial means to fund further growth and innovation.
“Since these organisations put people and planet before profit, their internally generated resources and access to external finance on conventional financial markets often remain limited,” she said. “The use of repayable forms of financing can help such actors mobilise additional resources which are only partially available from public budgets.”