The French are progressing very well on impact investment

Much is written about the UK’s leadership in the impact investment field – indeed, I have on many occasions mentioned this and spoken of the need to “maintain this lead”, “protect our dominance” and so on. This is not nationalism but self-interest.  As ClearlySo is one of the leading UK-based intermediaries operating solely in impact investment, we have a great deal riding on UK leadership.

Progress in the UK does continue, due largely to government-backed initiatives and the rapid entry of angel investors. To this is added the sometimes grudging/sometimes enthusiastic participation of large corporations and financial institutions.  This all creates progress and growth – about which we are delighted.  On the other hand, I sometimes fear that this leadership verges on arrogance, exacerbated by the fundamental advantage which comes from English being the global language of impact investing.

This linguistic dilemma was again manifest when the G8 Social Investment Taskforce reports were released; both the German and French versions were released and then promptly ignored by many of us Anglo Saxons whose language skills are not up to deciphering these documents.  They were subsequently released with English translations – what is clear is that the French, in particular, have been quietly making enormous progress.

The most eye-catching figure is that the size of the French market is estimated to be approximately €1.8 billion.  This compares with published figures for the UK of a few hundred million pounds.  Even when I adjust for the different approaches in calculating the two figures, there is only one conclusion to reach – the French market is larger.  In terms of structural flexibility and pure innovation, the British market is probably still well ahead, but it is smaller.

Both have a large, state-initiated catalyst – Big Society Capital in the UK and Banque Publique d’Investissements in France (with €500m). The French also have a very large ethical bank, Credit Cooperatif, which unlike the troubled Co-op Bank in the UK, has remained profitable, successful and cooperatively-owned.  But the main difference is the active engagement of the country’s large mainstream financial institutions.

Nearly all have actively-managed impact funds; their sums exceed €300m.  Much of this is due to the widely-known “90/10” funds, where 90% is invested conventionally, and 10% in strictly defined enterprise sociale. Banks are required to offer these products to individual customers and the uptake has been impressive.  Even on the institutional side there has been progress, without state intervention.  AXA Investment Managers created an €200m Impact fund of funds, and reports are that this innovation has generated considerable third party client interest (disclosure: I was on its Board from 2004-2010).

I am not intending to establish the basis for an inferiority complex or pander to nationalistic instincts.  The point is rather that we all have a great deal to learn from other countries.  As each nation develops its own path for creating markets where social impact becomes a third dimension to investing, there is no basis for arrogance.

I am reminded of a trip I made to Ontario for the first “Toronto Social Entrepreneurship Summit”.  One was made to believe the Canadian impact investment market was just about to be created there in the province of Ontario. Later that trip, I journeyed to the province of Quebec and found it had been going on for decades.  They just didn’t talk about it as much and few Anglo Saxons read their French papers on the subject.

First published in Third Sector in April 2015.

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