The European Investment Fund (EIF) is targeting €60 million for a social impact fund of funds, according to a statement.
The European Investment Bank Group will commit €50 million to the Social Impact Accelerator (SIA), Uli Grabenwarter, head of strategic development at EIF, told Private Equity International. The fund, which will be managed by EIF, also has secured commitments from Crédit Coopératif and Deutsche Bank.
The Social Impact Accelerator, which doesn’t have a hard-cap, will be open for the next few months and could grow in size if there’s more interest from institutional investors, Grabenwarter said. The fund will be deployed in the next 18 months.
EIF hopes the fund will help draw investors to social impact investing — a strategy in which investors target financial returns by backing companies that bring about positive societal change.
Through our investment approach and portfolio we [aim] to prove that we can deliver on the quality mainstream investors are looking for.
A fund of funds is needed as the social impact investing space is relatively new and fragmented, Grabenwarter said. “We would like to consolidate all the efforts that are going on and provide a reliable standard [for mainstream investors], otherwise we are going to suffer from fragmentation [which] will prevent impact investing from becoming a meaningful asset class,” he said.
“Through our investment approach and portfolio we [aim] to prove that we can deliver on the quality mainstream investors are looking for,” Grabenwarter said. For the strategy, EIF targets a net return of 7 percent, he added.
As governments across Europe are cutting spending, there are a lot of opportunities for social impact-focused businesses, EIF said. “What used to be taken care of by the welfare state, will no longer be taken care of by the public sector in the future [as a result of] of the economic crisis. To a large extent, social enterprises are there to fill the gap,” Grabenwarter said.
EIF sees the fund as a bridge period and plans to raise a successor fund soon after this vehicle, when it hopes to receive an allocation from the European Commission. “The European Commission is currently in a market assessment of how to deploy allocation under the budget of 2014 to 2020 in the social investment space and depending on that outcome we are going to enter discussions with [them],” he said.
EIF’s main mission is to support Europe’s micro, small and medium-sized businesses by helping them to access finance. Last year, the EIF invested €1.35 billion in 63 European private equity funds.