The Rise of Impact Investing in Spain
As the recent devastating storm in Valencia has left a trail of destruction, both human and material, it has also highlighted the remarkable solidarity of many ordinary citizens. Maria Angeles Leon, co-founder of Global Social Impact Investments, believes that Spain is inherently a country with a strong sense of solidarity, advocating for a different approach to investing: “through impact investing.”
What is Impact Investing?
Impact investing goes beyond just applying environmental, social, and corporate governance (ESG) criteria when selecting investments. It involves providing capital for transformative projects that have a positive impact on society. According to Jose Luis Ruiz de Munain, CEO of SpainNAB, impact investing focuses on capital that aims to address social or environmental issues while also generating financial returns. It measures and manages the impact of investments and supports companies whose primary mission is to address social or environmental challenges that would otherwise go unaddressed.
Growth and Trends in Impact Investing
- The total volume of impact capital in Spain reached 3.341 million euros in 2023.
- Direct impact investment saw a 26% growth from the previous year.
- Private equity firms managing impact investments saw a 32% increase in assets under management.
- Eight private equity funds, four foundations, and a crowdfunding platform expect a growth of over 50% by the end of 2024.
Expected Returns
According to a report by SpainNAB and Esade Center, the average return on private equity funds is 8%, 0.4% for foundations, and 3% for other impact investment actors.
Examples of Impact Investments
Companies like Bia, Kanjo, BCN-Resol, Moda re-, Grupo Gestcompost, and Irisbond are leading examples of impact investments in Spain. These companies focus on areas such as electric vehicle optimization, technology applications to prevent violence against children, clothing recycling, waste management solutions, and eye-tracking devices for communication.
Insights from Industry Experts
Experts like Jose Moncada from Bolsa Social emphasize the profitability and social impact of impact investing. Bolsa Social allows individuals to invest in impactful startups starting from 1,000 euros and contribute to project financing from 50 euros.
Yolanda Minguito from Triodos Bank highlights the diverse projects they finance, including renewable energy, immigration centers, elderly care services, and special education needs. Triodos Bank not only provides funding but also offers parallel solutions, advice, and management to maximize impact.
The Importance of Good Practices in Impact Investing
SpainNAB advocates for the implementation of a Code of Good Practices (CBP) in impact investing to attract capital and protect investors from potential impact washing. Impact washing, the unwarranted or exaggerated attribution of impact, is seen as a significant threat to the integrity of impact investing. The CBP aims to establish clear principles and processes to ensure transparency and authenticity in impact investing.
Conclusion
Spain is witnessing a significant rise in impact investing, driven by a growing awareness of social and environmental issues. With promising returns and a strong focus on positive change, impact investing is becoming a preferred choice for investors looking to make a difference while earning financial rewards.
FAQs
What is impact investing?
Impact investing involves providing capital to projects that aim to address social or environmental challenges while generating financial returns.
How can individuals get involved in impact investing?
Individuals can participate in impact investing through platforms like Bolsa Social, where they can invest in impactful startups with as little as 1,000 euros.