Private investment for public good: a threat, an opportunity or a necessity?
By Filippo Addarii
In every capital of Europe the main concern is how to get the economy back on its feet and increase the level of investment. But this is not just a job for government. As the public coffers are running short of cash the private sector is increasingly called in to take part in the enterprise. Fair enough; big business is one of, if not the biggest, beneficiaries of European integration: peace, social stability and the Single Market have provided safe ground on which to maximise profits.
The new investment strategy of the European Commission President Junker banks on a greater role for the private sector than ever foreseen by European institutions. For every euro invested by the investment package, it calls on private investors to provide fifteen more.
There is a further novelty. The scope in this strategy is broader than economic growth. The rise of inequality in European countries coupled with the social crisis in Southern Europe calls for a comprehensive approach that includes wealth redistribution and sustainability. This is a no brainer, it is the only strategy to eradicate the causes of social unrest and the legitimacy of quick-fix solutions and extreme groups.
So it doesn’t come as a surprise that Junker’s investment strategy includes ‘societal value’ within its investment criteria. This is not completely new. Europe 2020 already shared a similar comprehensive approach and the EIB made some investments along these lines (among the 34 Public-Private-Partnership transactions, there were 7 education and 4 health projects, with a total value of about 1 billion euros). But in general, the implementation of these intentions has been somewhat lacklustre.
What matters is not what is said during an international gathering in front of the cameras but where the capital is invested and who shares the benefits of such investment.
The UK has been a frontrunner on both sides. For over the last 10 years it has been experimenting with Public-Private Partnerships, championing social impact investment in the G8, and has been the first state that has legislated to ensure consideration of social value in public procurement. Not all the results have been positive but this is the risk that any innovator has to face.
The example has been followed by many. France, Portugal and Slovakia have set up dedicated funds to foster a comprehensive development strategy or are about to do it. Multinational corporations are also beginning to explore this new field: Vodafone has developed the first online payment system that aims to increase access to finance for unbankable people, turning a philanthropic project piloted in Kenya into a new business developing in Romania. AXA has set up one of the first social impact investment funds to tackle unemployment, healthcare issues and pension provision – areas that have hitherto been perceived as monopolies reserved for the state. And the number of cases is growing by the day.
Given the level of distress and entropy, Italy would be expected to be a champion in the field, but the country is limiting its bravery to promises of future policy changes and endless sequels of conferences. For instance, the much promised €500m fund for Social Innovation and Civil Society – il fondo per non toccare il fondo – has never materialized.
However, it’s not all doom & gloom on the horizon. Just recently Cassa Depositi e Prestiti (CDP) made the first move to open the market. The board of CDP, the State owned bank and the main public investment source in the country, has approved a resolution to widen its investment scope and include private partners in public good creation. The investment targets include public services, green economy, energy, environmental sustainability, innovation & development, heritage protection and tourism.
The UK and Italy are both economically and culturally mature societies. But even they could strengthen their socio-economic development agendas by exploring these new models of creating public good. They could also work together more closely to ensure that the European Union turn its commitments into effective actions.
Filippo Addarii began his career organising contemporary art exhibitions to promote human rights. He established the NGO GlobaLab to promote intercultural dialogue in the Western Balkans and ran the first post-war intercultural projects in Serbia. He moved to London in 2004, where he joined ACEVO to establish their international leadership development programme. From 2007 he was the Co-Founder and Executive Director of the Euclid Network of European civil society organisations. He is a regular senior advisor to the European Commission on social innovation, social enterprise, social investment and citizen engagement. At the Young Foundation, Filippo is responsible for international strategy and partnerships as well as for Europe Lab.