FAIR barometer of social finance reveals an increase is solidarity-based investments of €1.8bn in 2022.
French impact investment association FAIR and French daily newspaper La Croix have published their annual barometer of social finance which shows an increase of €1.8bn in solidarity-based retail investments in 2022.
The increase of 7.37% over one year brings the total retail investment in social impact to €26.3bn, equivalent to 0.45% of people’s financial savings, compared to 0.41% in 2021.
These latest findings complement FAIR’s Zoom report, published in November last year, which analysed the state of impact investing in 2020-2021 and found that investment in solidarity-based retail savings products increased 26% from €19.4bn in 2020 to €24.5bn in 2021, representing the highest increase in any given year since 1996.
Although not as marked, the inflow of new money into solidarity-based investments in 2022 still made it the fifth strongest year since 2008.
Patrick Sapy, CEO of FAIR, said: “We have come through three years of truly exceptional growth. The rate of growth in 2022 is less pronounced, but at 7.4%, it’s still a good performance.”
The barometer covers all social finance in France, which can be accessed through three main channels, including solidarity-based savings products provided by banks and mutual insurers, 90/10 savings schemes offered by employers, which allocate 5-10% of assets to unlisted social enterprises, and direct investment in unlisted social enterprises.
Direct investment in social enterprises on the rise
The most notable increase in capital flows was in direct investments in unlisted social enterprises, which despite being the smallest of the three channels, grew by 9% to just under €1bn in 2022.
“This trend reflects fundamental changes. On the one hand, social networks and other participative financing platforms make it easier to disseminate projects to as many people as possible,” said Sapy. “On the other hand, these technological developments are accompanying and reinforcing a rejuvenation of social savers, with young people naturally turning to these tools and increasingly inclined towards meaningful investments.”
Social savings via banks and mutual insurers grew by 5.5% over the year to just over €10bn whilst the 90/10 employee savings schemes saw an increase of 8.5% to €15.3bn countering the downward trend in employee savings overall, which fell 3.2% over the year.
Social impact in 2022
The barometer showed that the increase in social savings contributed to a total investment of €841.5m in 2022 into more than 1590 social and environmental impact projects, including the financing of 80 microfinance institutions, agricultural cooperatives and social enterprises promoting access to essential goods and services in developing countries.
Other notable social impacts included the rehousing of 1440 individuals, the supply of renewable electricity to 8381 households, and the funding of 1559 hectares of organic agriculture.
Sapy explained that France was seeing an increasing number of social innovations emerging, with social enterprises growing in number across the country, whilst more established social enterprises were attracting larger ticket sizes, with the average investment doubling from €350,000 to €750,000 in the space of a few years.
“The sector may remain a niche, but there is huge opportunity for growth given market potential,” he said, adding that this potential was supported by the PACTE law, which came into force in 2022 requiring insurers to offer at least one social option in life insurance policies, and the French and European regulatory environments, which were “imposing increasingly stringent rules to ensure funds are properly channelled and to combat ‘social washing’.”
Speaking to Impact Investor, Cyrille Langendorff, chair of the French National Advisory Board and vice-chairman of FAIR, added that the PACTE law had accelerated the development of social impact finance by FAIR and its members.
Looking ahead, he said: “With the increase in interest rates we can anticipate that revenue sharing solidarity-based investment products will become even more attractive to savers.”
Langendorff said the French government was also working on simplifying the Entreprise solidaire d’utilité sociale (ESUS) qualification in France which would further facilitate investment into social enterprise.
“The government’s work to fully digitalise the approval process, should help raise awareness and make applying for the qualification easier, thus extending the range of investments eligible for the 90/10 funds,” he added.
