Kick-starting discussions at this Meeting of the Friends of Aspen group was the observation that the establishment of the Social Impact Investment Taskforce (SIIT) by the G8 has sparked debate in a number of countries on social finance and the important role it can play. The ambitious objective of the Taskforce is to “unleash” one trillion dollars for investment within the space of fifteen years by harnessing entrepreneurship and innovation to solve social problems, and by introducing social impact as a factor in investment decisions, in addition to traditional risk/return assessments.
It was suggested that the difficulty in sustaining high levels of welfare in many countries, together with growing demand for services hitherto provided by the public sector effectively necessitate a new paradigm aimed at channeling potentially vast private financial resources into social impact projects to address issues such as homelessness, child and aged care, prisoner rehabilitation and school dropout.
The participants pointed to experiences in the Anglo-Saxon countries as demonstrating that private-sector financial resources can be pooled into social enterprise funds, enabling investment in equity and debt instruments and diversifying the risk for investors. In particular, the practice of issuing of Social Impact Bonds (or SIBs) linked to specific and measurable projects is becoming more and more widespread. This criterion of measurability was considered key to developing social impact initiatives, for the purposes of ensuring sound governance as well as tangible and positive investment results.
It was further noted that the report of the SIIT’s Italian Advisory Board highlights the country’s significant scope for development, based on its ecosystem of over 120 thousand firms, organizations and funds that already operate in social impact sectors, with an estimated potential funding flow for social impact investment of around 30 billion euro by 2020, representing around 1% of total financial assets held by Italian investors. It was acknowledged, however, that there is a need for reforms to the legal status of social enterprises, currently under discussion in Parliament, in addition to the creation of tax and regulatory incentives.
In conclusion, it was remarked that the strong tradition of cooperatives and mutuals, the commitment of successful firms to the principle of subsidiarity and to their local community, the important role of the Catholic Church in social initiatives, and the philanthropic and non-profit remit of banking foundations represent a key asset that sets Italy apart and provide a basis on which to build a new paradigm of public/private co-investment. The ability to tap into European funding for social initiatives and to engage the country’s specialized public-sector lender (the Cassa Depositi e Prestiti) in dedicated projects, such as for social housing, could provide additional leverage for the development of impact investing, thereby contributing to the revival of the country’s production system, and, consequently, to renewed employment growth.