InvestEU: what's in it for venture philanthropists and social investors? - Policy Webinar #14 - EU.com
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Policy Webinar #14 InvestEU: what's in it for venture philanthropists and social investors? Tuesday, 11th December 2018 | 15:00–16:00 CET
GoToWebinar | Tips & Tricks (1/2) GETTING STARTED § You are able to Open and Hide your Control Panel - The control panel will collapse automatically when not in use. To keep it open you can click the “View” menu and uncheck “Auto-hide Control Panel”. § To Join Audio - Choose “Mic & Speakers” to use the VoIP. - If you choose “Telephone”, use the PIN code received upon registration [726-208-990]. § If you have technical issues accessing the Webinar please call Gianluca Gaggiotti in the EVPA Brussels office [+32 (0)2 513 21 31]. 2
GoToWebinar | Tips & Tricks (2/2) Q&A TIME • Participants are muted throughout the webinar. • You are invited to ask questions in written form to our panellists. Your questions will be addressed during a Q&A session at the end of the webinar. • If you have a technical issue connecting or following the webinar, please submit a comment explaining your issues using the Questions panel. • This session is recorded. 3
Policy Webinar Series 25.06.2014 Policy Webinar #1 | EuSEF Regulation 25.09.2014 Policy Webinar #2 | Impact Measurement 05.03.2015 Policy Webinar #3 | Social Impact Bonds in the EU 17.06.2015 Policy Webinar #4 | How can VP/SI Practitioners access EU funding 23.09.2015 Policy Webinar #5 | Social enterprises and Public Procurement 16.03.2016 Policy Webinar #6 | Crowdfunding for Impact 21.06.2016 Policy Webinar #7 | Ordinary People as Social Impact Investors 23.11.2016 Policy Webinar #8 | EU Funding Update for VP/SI Practitioners 22.03.2017 Policy Webinar #9 | Foundations & Social Impact – Going beyond grant-making 14.06.2017 Policy Webinar #10 | The Sustainable Development Goals & VP/SI 12.12.2017 Policy Webinar #11 | Fostering public private collaboration to address social issues 11.04.2018 Policy Webinar #12 | How EuSEF’s recent reform can impact the VP/SI sector 20.06.2018 Policy Webinar #13 | Outcome Funds - Challenges and Opportunities 5
Policy Webinar #14 Introduction “InvestEU – What’s in it for venture philanthropists and social investors?” Multiannual Financial Framework: 2021 – 2027 • Long time horizon to ensure planning certainty • EU budgets to complement national budgets • Define instruments and strategy to deploy capital 6
Welcome to our e-Speakers! Bernardo Urrutia Dr. Markus Freiburg EaSI Programm Officer Financing Agency for Social EC - Employment, Social Affairs and Inclusion Entrepreneurship 7
Programme Time Description Speaker Welcome to participants 15:00 – 15:15 Bennet Barth, EVPA Introduction to the topic, agenda and speakers Bernardo Urrutia, European 15:15– 15:30 Multiannual Financial Framework 2021 – 2027 and InvestEU Commission Dr. Markus Freiburg, Financing 15:30 – 15:45 InvestEU from the practitioner’s perspective Agency for Social Entrepreneurship (FASE) 15:45 – 15:55 Q&A session (moderator and participants) All panellists 15:55 – 16:00 Summary and conclusions Bennet Barth, EVPA 8
Context The evolution of the EU Agenda: Social Business • Access to finance Initiative • Visibility • Regulatory environment 2011 Start-up and • Access to Finance • Access to markets Scale-up initiative • Framework conditions • New technologies and business models 2016 • International agenda 10
Context A broad and complementary range of EU-level instruments to develop the social finance market ecosystem EaSI Guarantee Micro- enterprises EaSI Capacity Building up to € 25k Financial Financial instruments intermediaries Social EFSI Equity Social Impact enterprises EaSI Funded (loans) up to € 500k Actions to boost supply & demand of social finance markets Grants Transaction cost support grant for financial intermediaries Operating grants for EU-wide networks: Euclid, EMN, EVPA, MFC Procurement Technical assistance for financial intermediaries 11 Under development
Context • The next Multiannual Financial Framework 2021-2027 will be the first for the European Union of 27. This is a pivotal moment for the EU. • The Commission proposes a new, modern and focused long-term budget, tightly geared to the political priorities. • The proposed budget combines new instruments with modernised programmes to deliver on the European Union’s priorities 2021-2027. 12
MFF 2021-2027 In billion euro, current prices The new Multiannual Financial Framework 2021-2027 “A budget for a Union that protects, empowers, and defends” InvestEU ESF+ 13
ESF+ A new and improved European Social Fund – ESF Plus The European Social Fund Plus will be the EU’s main financial instrument to strengthen the EU’s social dimension, by putting the pillar into practice. It is the new and improved version of the Existing European Social Fund. • The financial resources will be attributed to key political priorities and citizens concerns – ESF+ projects and programmes concentrate on challenges identified under the European Semester – Member States with a substantial number of young people not in employment, education or training will have to channel > 10% to youth employment activation of young people – Member States should at least 25% of ESF+ funding to measures fostering social inclusion and targeting those most in need. • ESF+ will be made with and complementary to other funds that provide support to people, such as Erasmus, the Asylum and Migration Fund, among others. 14
ESF+ A new and improved European Social Fund – ESF Plus The European Social Fund Plus will be the EU’s main financial instrument to strengthen the EU’s social dimension, by putting the pillar into practice. It is the new and improved version of the Existing European Social Fund. ESF funding is designed and implemented in a partnership with national and regional authorities. This partnership also involves a wide range of other partners. ESF+ will be a more flexible and simpler version of the current ESF merging a number of existing funds and programmes. 15
InvestEU InvestEU – a single fund to integrate all EU financial Instruments § EU Budgetary Guarantee supporting financial transactions § Suitable for projects able to generate revenues § Policy driven approach implemented through thematic policy windows § Possibility of combining EU grants and financial instruments § Complementarity between EU level and MS level § Simplification and Flexibility 16
InvestEU InvestEU – a single fund to integrate all EU financial Instruments Capital market instruments InvestEU supports 4 different Credit enhancement policy areas, focussing on where the EU can add the most value by Equity or quasi-equity providing a budgetary guarantee to Implementing attract private investment. partners Guarantees and counter- EU GUARANTEE or through other financial guarantees institutions 1. Sustainable Infrastructure Loans 2. Research, Innovation and Participation in investment Digitization platforms or funds 3. SMEs 4. Social Investment and Skills Subordinated debt 17
InvestEU InvestEU – Indicative proposed budget allocation Mobilised investment Window Budgetary guarantee (estimate) Sustainable infrastructure 11 500 185 000 Research, Innovation and Digitisation 11 250 200 000 SMEs 11 250 215 000 Social investment and skills 4 000 50 000 TOTAL (EUR Million) 38 000 650 000 • Budget for InvestEU Advisory Hub, InvestEU Portal and accompanying measures is proposed to be EUR 525m. 18
InvestEU InvestEU - Regulation support to Social Investments, in particular through: a. microfinance, social enterprise finance and social economy; b. demand for and supply of skills; c. education, training and related services; d. social infrastructure, in particular i. education and training, including early childhood education and care, educational facilities, student housing and digital equipment; ii. social housing; iii. health and long-term care, including clinics, hospitals, primary care, home services and community-based care; e. social innovation, including innovative social solutions and schemes aiming at promoting social impacts and outcomes in the areas referred to in this point; f. cultural activities with a social goal; g. integration of vulnerable people, including third country nationals; h. innovative health solutions, including health services and new care models; i. inclusion of and accessibility for persons with disabilities. 19
InvestEU InvestEU – Project Financing Process 20
MFF 2021-2027 Multiannual Financial Framework 2021-2027: Next Steps § Final configuration depends on the co-legislator decision: European Parliament and Council discussion are on-going. § 2019 and 2020 will require extensive preparatory work. § All elements need to be ready for starting operations on 1 January 2021 § Commission’ Expert Groups will be consulted on relevant aspects (e.g. GECES working group on social finance) 21
Dr. Markus Freiburg FASE ‘What's in it for venture philanthropists and social investors’
FINANZIERUNGSAGENTUR FÜr Eine Initiative von Social Entrepreneurship INVEST EU: WHAT'S IN IT FOR VENTURE PHILANTHROPISTS AND SOCIAL INVESTORS? Presentation at EVPA Policy Webinar Dr. Markus Freiburg Brussels, December 11, 2018 23
The FASE solution: building a bridge between social enterprises and impact investors FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship Social enterprises receive: Investors benefit from: ü support in developing their business models ü access to investment opportunities in leading, to reach investment readiness investment-ready social enterprises ü identification of potential investors ü customized impact investing opportunities, and recommendations for the ideal financing selected according to individual investor mix preferences ü comprehensive consulting and coordination ü clearly structured and transparent investment to guide them through the transaction and transaction processes between social processes enterprises and investors FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship 24
In over 5 years, FASE has arranged EUR 20+ mn in equity instruments raised for 40+ companies in variety of sectors FINANZIERUNGSAGENTUR FÜr Impact Sector Social Entrepreneurship Transaction closed 2.Runde Transaction > 500K Education 2.Runde 2.Runde Energy Solutions 2.Runde Health 2.Runde Inclusion & 2.Runde Infrastructure Other Mezzanine Equity Financing Model FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship 25
The challenge: early-stage social enterprises don´t fit into traditional types of funding FINANZIERUNGSAGENTUR FÜr Hybrid Social Entrepreneurship • Moderate returns • Few exit options • Not ‘one’ financing solution Non-Profit Commercial • No return • Market-rate returns • Short-term horizon • Exit options FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship 26
Our mission: closing the ‘strategic financing gap’ with hybrid growth capital FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship Market rate return Experimentation Strategic financing gap Scaling - Early stage financing - „Too large for philanthropists, too small (and risky) for institutional social investors“ Start-up Early-stage growth Later-stage growth < 50 TEUR 50 - 250 TEUR > 250 TEUR > 1 Mio. EUR § Equity § Multiple § Donations financing options Hybrid financing Combination of philanthropic capital -100 % and impact „first“ investments (grant) FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship 27
Food for thought: With InvestEU and ESF+ we should build a Single European Market of Social Innovation FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship Mobilisation of capital: Leverage more private capital into the social enterprise finance sector via de-risking of social enterprise funding (e.g. classical guarantees, equity guarantees, first loss capital) Capacity building: Support capacity development of social enterprises based on outcomes of acceleration / incubation programs (e.g., capacity building linked to Single European obtained financing volume of social enterprises) Market of Social Transaction cost: Reduce transaction costs for financial intermediaries (e.g., direct Innovation transaction cost support for financing rounds up to EUR 500k) and support set-up of new financial intermediaries (e.g., provision of patient capital for new financial intermediaries) Impact payments: Leverage ESF+ funds to provide outcome payments for social enterprises to increase attractiveness of their business models (e.g., direct pay-for- results payments, outcome-based unsecured debt, redeemable impact shares) Outcome match funds: Leverage ESF+ funds to match-fund outcome-based commissioning of national/regional/local governments to facilitate more pay-for-success schemes (e.g. SIBs, SIINC) FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship 28
Contact FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship Dr. Markus Freiburg Founder & CEO Financing Agency for Social Entrepreneurship GmbH Prinzregentenplatz 10 81675 Munich Germany Tel: +49 - 211 - 36 79 09 88 Mobil: +49 - 177 - 55 21 028 Fax: +49 - 3212 - 14 02 672 E-Mail:mfreiburg@fa-se.de www.fa-se.de/en/ FINANZIERUNGSAGENTUR FÜr Social Entrepreneurship 29
Q&A: ‘What's in it for venture philanthropists and social investors’ Bernardo Urrutia Dr. Markus Freiburg EaSI Programm Officer FASE
Thank you!
RUE ROYALE 94 B-1000 BRUSSELS T +32 2 513 21 31 EVPA.EU.COM info@evpa.eu.com european-venture-philanthropy-association @_EVPA_
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