Spain´s impact investment sector: where innovation can create disruptive social change

As in many other European countries, Spain is evidencing the emergence of an ecosystem of social enterprises, incubators, accelerators, and impact investors. The introduction has been slower than in other countries, particularly when compared to that of the UK or the US, but has reached a point of exponential growth in the last 5 years.

There are many different ways in which companies can generate social and environmental impact, but we have identified specific trends and innovations where we see an increased potential for disruptive change in areas that tackle our country’s most pressing social issues; youth unemployment, school drop-outs, an ageing population and environmental pressures and food waste. Below we will describe some of the most important trends in Spain.

For a country with 21,6% unemployment rate and over 50% unemployment amongst people under 25 years old, workforce inclusion should be an obsession. Although unemployment is strongly influenced by macroeconomic drivers, we are encountering numerous companies that focus on employment generation for underprivileged groups of the population, on who the effect of unemployment has been even harsher. Over the years Spain has developed a very strong Social Economy, with many “Work-force placement Companies” and “Special Employment Centers”. Even though it is a mature sector in our country, it is also highly atomized. We see a strong opportunity to invest in the growth and consolidation of these companies in order to bring their impact to exponential scale.

Another of Spain’s most pressing social problems is its ageing population: today there are 28 people over 64 years old per each 100 in working age, by 2050 there will be 73. With the aging of the population and the effect of other damaging habits on people’s health, we are seeing a dramatic increase in chronic and degenerative diseases. Both these trends call for an urgent optimization of our sanitary and social system’s resources. Up until recently the amount of capital invested in projects for the elderly was very low, but fortunately we are now seeing a shift in this trend with a growing emergence of for-profit products, services and centers that aim at improving the quality of life of the elderly by working on their cognitive and motor skills. In parallel, the rise of e-health and m-health products is transforming the relationship between patients and doctors allowing for daily communication, thus reducing the level of high-risk episodes and boosting hospital efficiency.

Moving from the elderly to the young, Spain´s most important challenge in education is its very high school drop-out rate (22%), twice the European average. Spain is also below the global and European average in terms of math scores and holds the 31st position out of 44 in problem resolution. This data points to an urgent need to update our education system, searching for new methodologies adapted to today’s needs. There are emerging methodologies that have revolutionized teaching, putting the student at the center, dealing with classroom diversity and adapting the message and methods to the different types of intelligences. These new methods, especially those that are backed by rigorous studies on their academic and skill-related impact have the potential to create long lasting benefits for the economy and society.

Other interesting opportunities for impact investing in Spain are found amongst the companies searching to improve our environment, particularly those focused on city pollution. With 37 Spanish cities exceeding the recommended levels of pollution in 2015, we see a lot of potential to reduce this through green mobility, energy efficiency, waste management or sustainable consumption products. These types of models can have an important impact on citizens’ health and the way we are using the planet’s resources.

Lastly, we see a lot of potential in improving Spain’s food cycle. With 2,5 million people resorting to community kitchens every day, we should not allow the current levels of food waste to continue. Not only can we reduce waste, can also decrease the consumption of healthy and organic products with the goal of improving people’s health and the livelihood of the agricultural sector. According to Spain’s Ministry of Agriculture and Environment, Spain is the leading European country in terms of organic agricultural surface under production. And yet, it is also one of the countries with lowest organic consumption penetration, at only 1% of total food consumption. By improving distribution and access to organic products as well as reducing the price differential with conventional food (through increased efficiency) we believe that the consumption of organic products in Spain could increase significantly.

Spain is at a great moment of its history for the successful growth of the impact investing and venture philanthropy movements. Aside from a wealth of social challenges that the country will need to address in the coming years, public funding for third sector activities has dropped almost in half in the recent past. Attempting to address this situation, social businesses are seeing exponential growth in their number (and quality). Currently, Spain has one of the top 3 social business ecosystems in Europe. Exciting times lie ahead.

Autor: Lara Viada – Asociada de Vivergi Fund

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