Gaps in the Impact Investment Ecosystem

Impact Investment and Social Finance gain more and more international attention. Local ecosystems are forming share, national legislation and other factors highly influencing this development. Comparing those ecosystems can give valuable insights, what countries could learn from each other and to what extend national solutions are needed.
This study is a first comparison between the UK and German impact investing markets. It is based on a qualitative research method, namely explorative and semi-structured interviews as well as two focus groups. The status quo of both countries as well as the challenges found in the German market are then used to draw conclusions on how the German market could benefit from the UK's development. Results are clustered around demand, intermediaries and supply as well as national context, regulatory framework, impact and leadership.
This study concludes to what extent the UK market can act as a role model and which challenges require a 'German solution' or can be met by adapting actions taken in the UK.

Auteur

Laura Kromminga was born in 1989 in Berlin. She dedicated both her bachelor and master thesis to the topic of social entrepreneurship and impact investment. Previously working for the donation platform betterplace.org, the author witnessed the struggle of social organisations to raise adequate finance. Currently, she is working for the Hybrid Finance Initiative at Ashoka Europe, writing case studies and articles about Social Finance.

Échantillon de lecture
'Textprobe:
Kapitel 4.1.1 UK and German context, policy framework, impact and leadership:
Country-specific cultural context:
This research cannot provide a full analysis of the cultural context, because of the wide implications this would have.
In the UK, there are more investors than in other countries and greater experimentation with different kinds of instruments (Glänzel et al. 2012, p.29). Research conducted by Robeco suggests that within asset management the impact investing market will become mainstream by 2015 (Glänzel et al. 2012, p.30). This development is impacted by the fact that the UK does not have a similarly fardeveloped welfare sector as Germany. Social sector organisations in the UK therefore need to provide social services not provided by the government. The public understanding is that social problems need to be tackled through private initiative, not by the government.
In Germany, there is a relatively long tradition of social banking, with the first social bank having been founded in 1923 (Bank für Sozialwirtschaft, providing free social welfare organisations with low-cost credit) and today's most prominent social bank, GLS Bank, established in 1974 (Glänzel et al. 2012). Also, "environmental protection and renewable energy are two investment sectors where there are numerous and quite substantial investment trusts" (Glänzel et al. 2012, p.38). Parallel to that the "Centrum für Soziale Investitionen und Innovationen" of the University of Heidelberg found that social enterprises in Germany exist in a range of ages, reflecting that 'social enterprise' is not a new phenomenon (Spiess-Knafl et al. 2013). In Germany, "a codified welfare system with legally guaranteed funding streams has enabled the growth of a large social sector, which is at the heart of delivering government funded social provision" (Social Impact Investment Taskforce 2014). The general public believes that the government is responsible for social services.
Country-specific economic context:
Data relating to expenditure in Germany reveals a large budget, but in relation to the number of organisations, the German budget is lower than in the UK (Hubrich et al. 2012, p.40) [...].
A 2012 study among European countries, including Germany and UK, revealed that public funding, earned income, as well as grants and donations play by far the most central roles in resourcing social economy organisations (Glänzel et al. 2012). Impact investing still plays a minor role in both countries."While social investment is not the bulk of social finance in the UK (in terms of volume), it does play an important role" (Glänzel et al. 2012, p.7). The economic crisis significantly effected social mission organisations in the UK, with public funding for charities being cut by over a third so that charities were fearing they will have to close (Glänzel et al. 2012).
In Germany, "the field consists of a sector of free welfare organisations providing social services with a longstanding tradition of social banking; a field of mature and established grant-based organisations; and a nascent field of social enterprise financed through various channels, yet still generally undercapitalised" (Glänzel et al. 2012, p.6).
Country-specific political context:
In the 2012 study, in all cases "by far the major player remains the state" in terms of funding (Glänzel et al. 2012).
In the UK the state plays a less important role in financing compared to other countries, like Germany, while there "are a number of social banks and investment funds as well as numerous social investment finance intermediaries (SIFIs)" (Glänzel et al. 2012) Nevertheless, in the UK "public income and self-generated income contribute almost the same share of the budget." (Hubrich et al. 2012, p.62).
In Germany on the contrary much of the "social economy is still financed not through social finance in a narrower se