The European Commission has proposed a new legal brand for social investment funds, which will allow such funds to market themselves and raise money across Europe.
The proposed brand, which has been announced this week, is called the European Social Entrepreneurship Funds. It will be an EU-recognised label for social investment funds that the Commission hopes will lay the foundations for a strong European market in such funds.
To get the brand, a fund will have to prove that a high percentage of its investments (70 per cent of the capital received from investors) is spent in supporting social business.
For now, funds under the new social investment brand will only be available to professional investors. Once the framework is up and running, the Commission will examine possible measures to make such investments also available to retail customers.
All funds that use the European Social Entrepreneurship Funds label must clearly publish information about the kinds of social businesses they target, the ways they are selected, the ways the fund will help social businesses, and how social impacts will be monitored and reported.
There will also be clear requirements for funds to inform investors on how they will go about monitoring and reporting on impacts.
A European Commission spokesperson said more detail was likely to be needed regarding impact in the future: “The Commission will undertake further work to develop better and comparable ways on how social performance of investments can be measured. This will allow for the development of a more transparent investment market and greater investor confidence.”
The move is part of the Commission’s growing support for social enterprises, which it says represents 10 per cent of all European businesses.
A spokesperson said: “While these businesses often receive public support, private investment via funds that invest in social entrepreneurs remains vital to their growth. However, such specialised social investment funds are rare or not large enough. Cross-border investment in such funds is unnecessarily complicated and expensive.
“Fund managers will not be forced to use the new framework, but if they do, they will be able to gain access to investors across the EU and to a clearly-recognisable EU brand that investors will grow to trust and seek out.”
The proposals now pass to the European Parliament and Council (member states) for negotiation and adoption under the co-decision procedure.
