La France : le pays avec un million d’investisseurs sociaux

Faustine Delasalle, Associée On Purpose à Londres, et actuellement en placement chez Numbers For Good (société de conseils pour des entreprises sociales levant des fonds) donne un aperçu du paysage de l’investissement social en France.


France: the country with one million social investors

In the global landscape of social investment, the UK thinks of itself as a world leader and one could wonder if France even appears on the map. It does. France’s social investment marketplace is growing and, while looking to London for inspiration, the French are building on their own philosophical and political history to develop a social investment market of their own. Numbers for Good associate and former political adviser to the French Socialist Party Faustine Delasalle sets the record straight.

Social enterprises disrupt a well-established sector

A recent survey showed that 70% of the French have never heard of “social entrepreneurship” and half of those who know the expression are unable to define it. As for “social investment”, French stakeholders have not yet reached an agreement on a common word to describe this phenomenon. The government’s last report on the subject used an approximation borrowed from English: “impact investing”.

The terminology may be unknown, but a socially entrepreneurial culture is alive and well. It is indeed not unusual to meet a social entrepreneur who has no idea that he is a social entrepreneur. The social enterprise vocabulary is like a new slang, disrupting the communication of a well-established sector — the so-called “social and solidarity economy”.

The ongoing debate around lexicon is only the tip of the iceberg. The French social and solidarity economy is proud of its credentials: a long history fuelled by workers’ and farmers’ movements, a strong commitment to democratic decision making (one man equals one vote) and reinvestment of profits. The social economy plays a significant role in the French economy making up 10% of employment and 10% of GDP.

The shift towards the new “social enterprise” paradigm can be perceived as a threat by charities, mutual associations, cooperatives and foundations. It opens the door to hybrid for-profit organisations who challenge the core values of the incumbent sector while marginalising organisations with less commercial focus.

Still the kingdom of the state

Since the 2000s, the key growth driver of the social enterprise sector in the UK has been the government’s strategy to encourage outsourcing of public services delivery to private and third sector providers and spinout public departments. The French landscape differs significantly. In-house delivery of public services and outsourcing to quasi-public bodies directly controlled by public authorities are prevalent in many areas. Some sectors, such as education, are still highly centralised.

The French political culture is characterised by a deep attachment to the principle of equality and by the conviction that it is the responsibility of the state to guarantee it. In this context, the expectation that the state should be the main funder and ensure the mass roll-out of social innovations is still widely shared across the charity sector.

In the wake of public cuts and widening inequalities, this vision is increasingly challenged. Financial sustainability is a growing concern for social enterprises, who must now diversify their funding. A recent survey of “modern” social entrepreneurs showed that the percentage of social enterprises for whom public grants represent less than 50% of revenues boomed from 70% in 2008 to 90% in 2015.

France: the country with one million social investors

There is an increasing interest in social investment across the French social sector. French delegations travel to the UK, where social finance grew on the fertile ground of the City of London, to meet the leading social investors and learn about social impact bonds. But it would be a mistake to think that our neighbours have everything to learn in terms of social finance.

France has been developing a potentially prodigal source of social finance for several years, so-called “solidarity finance”. Indeed, France counts one million social investors, to the UK’s mere 10 or so. How is that possible? The banking sector, in partnership with alternative local finance institutions, developed a range of specialised savings schemes for households offering both financial returns and the opportunity to channel these savings to fund grassroots social or environmental projects.

These financial products fall into two main categories: proper social investment products and “sharing products”. The former invest 10% to 100% of savings in social and environmental projects. 90/10 products allowing to mitigate risks through a diversified portfolio are prevailing. The former are closer to new forms of philanthropy: investors donate at least 25% of their financial returns to charities.

The rise of “solidarity finance” built on a series of French specificities: one of the highest household saving ratios in Europe, several cooperative and mutual banks among the most established actors of the banking scene, and a regulation coupled with tax exemptions pressing all companies with more than 50 employees to offer several options of company savings scheme to their employees, including one “solidarity finance scheme”.

In 2014, the stock of investment in these products reached €6.84 bn (+14% over one year), of which €1.15 bn were invested in social or environmental projects. New social investments amounted to €240m for 2014 while €5.7m were collected for charities through sharing products during the same year.

A public funding revolution: shifting away from grants towards repayable finance

Exploiting the narrow spaces of European regulations, France has a culture of economic interventionism. Justified by the need to bridge the market failures of the financial sector, the development of public investment in private companies, especially small and medium businesses, testify to this political strategy. The Public Investment Bank (BPI) and the Regional Authorities developed a range of repayable finance tools to boost the growth of SMEs: loan guarantees, public loans, quasi-equity and equity funds (with private lead investors who have agreed to align on investment strategies initially drafted by public institutions).

As French social sector organisations start presenting themselves as social enterprises, this discreet mind-set change is slowly conveyed to the government and local authorities. Public investors show a growing interest in opening their repayable finance tools to social enterprises, in replacement of grants. At its launch in 2012, the new Public Investment Bank committed to invest 500 million euros in the social and solidarity economy. Effective results fall short of the sector’s expectations so far. If the fall in public funding continues however, it would allow the public sector to recycle the resources dedicated to social enterprises in a time of budget cuts and encourage social sector organisations to strengthen their financial sustainability.

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