Catalina Parra

The Roman aqueduct that brought water from the mountains to people of Segovia was a fitting backdrop for the recent gathering organized by IE University and Fundación Compromiso Empresarial. The charge was to lay the foundation for a 21^st-century ‘bridge’ that will channel a different kind of abundant resource – investment dollars – to a new destination, Spain’s emerging social entrepreneur sector.  

I joined another 40 experts in their respective fields for the two intense days of brainstorming and planning at Impact Investments: Towards a Social Capital Market. The hand-picked group included fund managers; investment advisers; leaders of financial institutions, non-profits, foundations, social enterprise funds and incubators; academics; lawyers; and politicians. Such diverse perspectives made the discussions fascinating, albeit sometimes heated.

Combining income generation and social mission is a well-established tradition in Spain. The country has a long history of cooperatives, and more than 80,000 people with disabilities work in ‘social businesses’. Now a growing class of Spanish social entrepreneurs with local and international reach is emerging. In the words of organizer Javier Martín Cavanna, the goal of the Segovia session was to ‘bring together investors who want to help with social initiatives and to combine their financial and profit objectives with environmental or social goals’.

Here’s what stood out for me:

The importance of tailoring offerings to the Spanish market while taking full advantage of what’s happening worldwide. I heard constant references to the excellent work done by GIIN and Rockefeller Foundation/JP Morgan Stanley and exhortations to not reinvent the wheel. At the same time, there was an almost universal consensus that this effort must to be explicitly designed with the Spanish market in mind. We need to combine international expertise with a deep understanding of ‘how things work here’.

The eagerness of all parties to look for new models to fund social initiatives. Over the last 35 years Spain has developed a vibrant non-profit sector. Yet the granting foundation actors that are so common in the US and the UK are strikingly absent. The vast majority of philanthropists choose to operate their own programmes, rather than fund the work of others. In this era of crisis and budget cuts, the Spanish social sector may leapfrog right over an era of foundation grants and ‘go direct to the markets’. There will be many limitations, of course. Donations are the right vehicle for funding many social initiatives but, if Segovia is any indicator, impact investments will also be embraced.

The interdisciplinary approach is enticing… and essential. It was invigorating to exchange ideas with so many talented people who are passionate about investing for social good. To create a viable new industry, we need to incorporate both the input of the fund managers, bankers and ‘gatekeepers’ and the voices of non-profit leaders and social entrepreneurs. Segovia was a great beginning and we must keep widening our circle of stakeholders.

The public actors must be at the table. Today billions of euros flow from Spain’s national, regional and local government entities into non-profits and small business. Impact investment opportunities will come from each sector and private and public funders should leverage each other’s funding of both types of organizations. And of course potential investors were quick to point out the critical role that fiscal incentives can play in either attracting or dissuading new types of investment.

Thanks to some remarkable facilitation, in just two days the group created a road map for developing a Social Capital Market in Spain. The proposals cover four areas:

• Understand the market and products for impact investing in Spain.
• Describe and understand potential impact investors.
• Help standardize and apply impact measures and evaluation.
• Help design the legal and governmental frameworks for impact investments.

The proposal is described in more detail here.

We’re off to an amazing start and know we’ve got lots to learn from our colleagues at home and abroad. What advice do you have for seeding an impact investing market?

Catalina Parra is founding partner of Philanthropic Intelligence