Portuguese government plans to use EU funding to develop social investment vehicle

Sweeping plans include Big Society Capital-style investment

The Portuguese government is seeking to set up a Big Society Capital-style social investment fund of funds to finance social innovation and social entrepreneurship initiatives – and is considering using European ‘structural funds’ to develop its plans.

It comes as member states are in negotiations with the EU about the shape of structural funds, which are used for regional investment, for 2014-20. Regional development minister Miguel Poiares Maduro is leading these negotiations with the European Commission.

Programmes run for seven years and member states haggle with the EU about how much money they will get and what it will be spent on.

Speaking to RI, Carla Pedro, who advises Poiares Maduro on structural funds and social innovation, said that the funding could be applied to create a wholesale initiative – “Social Innovation Portugal” – combining capacity building grants with a funds of funds for social investment, along the lines of the UK’s Big Society Capital, the pioneering social finance institution.

She said the government was seeking other co-investors and that there has already been exploratory conversations with the European Investment Bank.

She said: “We are looking across the entire life cycle of social innovation projects, at capacity building, matching skills, venture philanthropy, making debt and equity instruments more adjusted to the social economy, and social impact bonds,” adding that Portugal hopes EU funding would accelerate this.

She added that the ongoing negotiations of EU funds, combined with the current economic and financial context, have opened a window of opportunity at EUlevel for this type of innovative solutions, not only in Portugal but also throughout Europe.

She said the negotiations with the EU were expected to complete in September/October.

Separately, the Portuguese Social Innovation Bank (Banco Inovacao Social – BIS), a coalition of 27 partners aiming to foster social innovation, is seeking to create what would be only the second fund under the new European Social Entrepreneurship Fund (EuSEF) regime. The new fund would follow Germany-based social investor BonVenture, which became the first registered manager of EuSEF in April.

“We are looking across the entire life cycle of social innovation projects”

Maria do Carmo Marques Pinto, chairman of BIS Operational Council, told RI that the group is organising local public-private innovation hubs and regional investment funds to utilize some of the €122m the government recently announced as part of its Social Innovation Fund.

Do Carmo Marques Pinto said the planned EuSEF fund will act as a fund of funds. “On the one hand it will be used to attract foreign social investment and government funds. On the other hand it will invest in local social investment funds focused on giving support to local social innovation projects. It’s the best vehicle to start building the new outcome finance market in Portugal.”