Impact Investing in the DACH Region

Dr. Martin Vogelsang, Germany Country Representative, EVPA, will talk about ‘Impact Investing Trends from the European Market’ on the Congress on Impact Investing on 24 January 2017.

Martin is the Germany Country Representative of the European Venture Philanthropy Association (EVPA). He is also an impact investor and social entrepreneur with a long-standing career in the banking and strategic consulting business. Martin spent several years in India setting up an incubator for start-up social enterprises. He is currently a managing partner of Social Synergy from Mumbai, India, which is investing patient capital and on-the-ground technical advisory into its portfolio organizations, supporting them in developing their social business models and leveraging their potential.
He has a PhD in Business Ethics from Universität Eichstätt in Germany.

What are important findings of EVPA’s latest Industry Survey on Venture Philanthropy and Social Investing in Europe?

In our bi-annual survey we explore how investments continue to be made across different geographies, sectors, beneficiaries. For 2016, the European Venture Philanthropy (VP) and Social Investment (SI) sector is reporting an overall market growth, stabilising budgets and a good dealflow. We also see increased co-investments among peers.

The 108 surveyed organisations invested an average of €7.8 million through VP/SI activities in Fiscal Year (FY) 2015. Already during this period a number of smaller players (with budgets under €2.5 million) have entered the sector. €6.5 billion was invested by the respondents in social organisations and projects since they started their VP/SI operations. These investments went primarily to social enterprises (37 %) and non-profits (35 %).

Even if social return is still the main priority for the surveyed European Venture Philanthropy Organizations (VPOs), 31% anticipates capital repayment and 39% a profit in future.

Can you give us examples of Corporate Social Investment?

We see that corporations are becoming an increasingly important source of finance for VPOs. For example, Renault Groupe launched MOBILIZ, a programme of social entrepreneurship to help remove the mobility obstacles preventing low-income jobseekers from accessing employment. Danone set up a €70 million “Communities” mutual fund to fight poverty and provide access to safe drinking water. The La Varappe Group teamed up with PhiTrust and Schneider Electric’s Venturing Fund, which resulted in placing 600 unemployed people into permanent positions. In the UK, Centrica set up Ignite, a £10 million impact investment fund focused on energy solutions.

In line with this development we observe that as the Venture Philanthropy model becomes relevant and appealing, and as corporate social engagement strategies move towards an investment focus, corporations and corporate foundations have and are becoming EVPA members and team.

What could stimulate the impact investing field in the DACH region?

In order to develop the (social) impact investing market in German-speaking countries, various concerted actions need to be taken. Intermediaries need to offer products of a sufficient size, for example by bundling impact investments with social and responsible investments (SRI), to bridge the lack of larger impact investment targets. Grants, junior tranches, or guarantees by philanthropic investors should enable investments by traditional investor types. For this to happen, syndication is needed. It also takes a supportive regulatory framework and subsidies. Up-front tax deductions and write-offs for losses should be developed to foster the DACH market. Finally, pay-for-success schemes can create further incentives for new social innovations and investments.