Bolsa Social: Spain’s marketplace for “patient and committed capital”

New exchange aims to democratise social impact investment

José Moncada used to describe himself as a social entrepreneur trapped in the body of an EU bureaucrat.

He developed a career in financial policy and regulation, working for the European Commission in Brussels and the European Securities and Markets Authority (ESMA) in Paris. But everything happens for a reason.

It was in those cities where he met entrepreneurial like-minded people from across Europe who were active in the social impact investment arena.

So he returned to his native Spain in 2014 determined to set up the Bolsa Social , which its direct translation from Spanish would be the ‘Social Stock Exchange’.

However, the Bolsa Social is more like an equity crowdfunding platform, the first of its kind authorised by Spain’s securities regulator following a 2015 Act that introduced this form of financing as well as crowdlending.

“Social impact investment in Spain is still in its infancy,” Moncada tells RI.

“Investors have a very traditional approach. They either go for exclusively profit-driven investments or plain philanthropy. There is something in between worth exploring so that ethical values are not ignored when taking investment decisions.”

The Bolsa Social brings together those ethically aware investors with companies whose core business models aim at generating not only good returns but also a positive social impact.

Moncada says one of the goals of the Bolsa Social is to “democratise social impact investment” as the minimum capital required to become an impact shareholder of pre-selected companies is €500.

Among them are angel investors, family offices, venture capital funds as well as the very few Spanish impact investment fund active in the country.

The Spanish subsidiary of Dutch sustainable bank Triodos, an operating partner of the Bolsa Social, is the custodian of those sums which are fully reimbursed to investors if the project pre-selected doesn’t raise its target.

Moncada recollects that of the total 150 projects that have been reviewed, just a handful have been published to start seeding capital.

“We’ve managed to raise €1.1m for five companies. That seems like a drop in the ocean, compared to figures of the UK impact investment market, for example. But it’s quite significant for Spain and we have plans to go beyond the equity crowdfunding platform.”

Could the Bolsa Social pave the way for a social impact stock exchange, where shares of those companies can regularly be bought and sold?

“Exactly. The idea is to increase the quality and quantity of investors, as well as facilitate liquidity, through some sort of secondary market.”

But Moncada emphasises that such a market wouldn’t be a speculative stock exchange, as by definition, investments in the Bolsa Social are made of “patient and committed capital”.“The Bolsa Social’s investor profile is one who wants to grow the investment alongside with the company’s development over the long run. Therefore, they shouldn’t expect to find a buyer immediately, but we can definitely work on a space where the sell-side and buy-side meet.”

Other operating partners of the Bolsa Social are Analistas Financieros Internacionales, a consultancy firm, and Gómez-Acebo & Pombo, a law firm. Both are involved in the vetting process of companies, the latter taking care of the legal due diligence of candidates.

An investment agreement governs the relationship between investee companies and investors. Crucially, the largest stockholder becomes the so-called ‘investor of reference’.

This main investor represents the rest of the shareholders and has the right to appoint a board director and vote on their behalf at AGMs.

Moncada says that the investment agreement imposes duties on companies, such financial and non-financial reporting requirements, particularly about the achievement of their social impact mission.

The contract, however, also aims at encouraging stewardship and the active involvement of investors in the projects.

“The Bolsa Social provides a platform to facilitate company-investor communication, whereby shareholders become ambassadors of the company. The aim is to create a proactive community of investors who want the company to succeed, not just because they have skin in the game, but because they believe in the social impact of the investee company.”

Another goal of the Bolsa Social is to influence government and more broadly the general public about impact investment. As such the people behind the Bolsa Social are also members of the social investment network Red Española de Impacto Social (REDIS) where the very few Spanish investors in this field are represented.

REDIS is an association that advocates in Spain for the G8 Taskforce on Social Impact Investment’s recommendations launched in September 2014 under the UK G8 presidency. The Taskforce called on the financial sector to unleash $1trn of private sector impact investment to tackle social problems.

Other affiliations of the Bolsa Social is the membership of the European Venture Philanthropy Association and partnerships with organisations from the social entrepreneurship space such Ashoka or UnLtd.

Ultimately, as the Bolsa Social consolidates in Spain, Moncada’s plan is to export the idea to other jurisdictions. Latin America would be a good destination, as Moncada attended recently Colombia’s Global Summit for Social Innovation, where the Bolsa Social was invited.

“We’d love to expand the Bolsa Social in those countries. We are studying possible models,” Moncada admits.