BNP Paribas and EIF launch €10m fund to co-invest in EU social impact bonds
by Ben Poole
In order to develop social impact bonds (SIB) within the European Union, and France in particular, BNP Paribas and the European Investment Fund (EIF) have launched the BNP Paribas European Social Impact Bond Fund, a co-investment fund.
To create and manage this mechanism, BNP Paribas has relied on its subsidiary BNP Paribas Asset Management, which has expertise in impact measurement and solidarity funds, with more than €2.3bn assets under management at the end of 2019.
An SIB is an original and multi stakeholder financing tool, which promotes experimentation and prevention in social action and public policies, and also generates savings for public authorities. Investors pre-finance social innovation projects through a contract that sets ambitious social impact targets, previously negotiated with the public authorities and a social operator which can be a social enterprise, a NGO, or a charity, for example. If these targets are met, the public authorities will pay back investors proportionally to the social impact generated (including a success fee). If the social objectives are not achieved, investors may not be reimbursed.
Wishing to build upon BNP Paribas’ expertise in structuring SIBs, EIF has approached the Bank to set up this co-investment agreement. It allows both organisations to invest, together and for equal commitments, in SIBs structured by BNP Paribas within the European Union.
Since 2016, nine SIBs structured or co-structured by BNP Paribas in France and in the US have been signed, for a total amount of €28m, in which BNP Paribas has invested approximately €8m. EIF has participated in the development of SIBs since 2015, first in the UK, the most mature market, and then contributing to the structuring and investment of the two largest SIBs in the European Union: the Koto SIB in Finland and the SIB Joining Forces in the Netherlands. In total, EIF has invested more than €26m in SIBs.
This co-investment agreement, deployed within the ‘Juncker Plan,’ or EFSI (European Fund for Strategic Investment), is an opportunity for the European Union to fulfil its social mission of improving access to funding for various social organisations and companies, with the aim of supporting the social sector development and, ultimately, mobilising financing though private capital catalysing.
“The Social Impact Bond concept under the Investment Plan for Europe brings tangible benefits to some of the most vulnerable groups in our society,” said Paolo Gentiloni, European Commissioner for the Economy. “Already we have witnessed refugees in Finland being re-skilled and matched into jobs; and former military personnel being reintegrated into the workforce in the Netherlands. With this new SIB fund set up by BNP Paribas and the European Investment Fund, children and young people are already being protected, nurtured and encouraged to strive for more.”
“The Social Impact Bond is a financial innovation that sets common good goals at the heart of the economy,” commented Antoine Sire, head of Corporate Engagement at BNP Paribas. “We contribute to its development, through our technical expertise in structuring and investing in those projects. As a funder of all types of economic actors, we naturally are at the crossroad of SIB stakeholders: Investors, public authorities, social operators, philanthropists… We have been able to honour EIF’s request and are enthusiastic to participate in this new coalition.”
Three SIBs are already funded by the BNP Paribas European Social Impact Bonds Fund: one in favour of Article 1, to improve perseverance and ambition of students in agricultural education in Hauts de France and Occitanie regions; and 2 SIBs in favour of Fondation Apprentis d’Auteuil in Loire Atlantique and Gironde, aiming at preventing the placement of children in foster care. Several others are under study or structuring in France, Belgium and Italy.
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