Social Economy Europe participated in the presentation of the 8th Report on Ethical Finance in Europe, “Capital for the Common Good”, published by Fondazione Finanza Etica, Fundación Finanzas Éticas, and the FEBEA – European Federation of Ethical and Alternative Banks and Financiers. The event was hosted by the Social Economy Intergroup at the European Parliament on December 1.
The event brought together key actors, including Maravilla Abadía Jover, Co-Chair of the Intergroup on Social Economy; Irene Tinagli, Co-Chair of the Intergroup on Social Economy; and Ruth Paserman, Director at DG Employment, Social Affairs and Inclusion at the European Commission.
The Report analyses 2023 data, highlighting that ethical finance is not a marginal phenomenon but a structural player that significantly finances the real and social economy by providing resources for initiatives such as social housing, energy communities, worker-owned businesses (including worker buyouts), climate adaptation projects, international cooperation, the cooperative movement, local and micro-enterprise development, cultural initiatives, and migrant and refugee entrepreneurship. It is a democratic financial infrastructure that actively supports and strengthens Europe’s social fabric by intervening precisely where conventional markets fail and realigning financial flows with social values and community needs.
Key findings of the Report
- – The social economy in Europe includes over 4.3 million organisations (cooperatives, mutuals, associations, foundations, etc.) that pursue objectives of general and collective interest, reinvest the majority of profits for the benefit of the community, and are based on democratic and participatory governance models. The social economy in Europe has proven vital for social cohesion and now has a weight similar to that of the automotive sector. The social economy not only encompasses a vast range of organisations, but is also an area constantly expanding in terms of its sectoral distribution.
- – The report’s data shows that ethical banks outperform traditional financial institutions in credit quality and social impact, particularly in areas such as social inclusion and community development. Notably, over 70% of their loans are directed to the social economy.
- – The BESGI (Banks’ Environmental Social Governance and Indirect Impacts) analysis – a tool that measures banks’ sustainability performances – finds that 72% of ethical banks’ loans have a positive environmental (e.g. support for the circular economy, waste management, organic farming, urban regeneration, etc.) and social impact (e.g. loans to the third sector, for social inclusion and welfare initiatives, for social housing, international cooperation, female entrepreneurship, innovation financing, microcredit to families and/or businesses, etc.) compared to 19% of large banks.
- – The report also shows that return on Assets (RoA) is higher for ethical banks: 0.75% compared to 0.64% for large banks, demonstrating that ethical impact goes hand-in-hand with economic sustainability.
Recommendations for European Policies
The Report formulates clear recommendations for European political decision-makers to support the social economy and the ethical orientation of financial flows:
- – Develop capital instruments (equity and quasi-equity) suitable for micro-enterprises and cooperatives: currently, financial support for the social economy mainly occurs through credit, but strengthening the social economy also requires tools to reinforce the capital of social enterprises (i.e. patient capital).
- – Simplify and make public guarantees more accessible for social economy organisations.
- – Make public instruments more flexible and proportionate.
- – Directly involve social economy organisations in the design of financial policies.
- – Develop enabling measures for the social economy and increase its visibility and accessibility in the new architecture of the funds.
- – Define in a transparent and rigorous manner the parameters and criteria for an investment to be considered sustainable in line with the EU’s climate and human rights objectives.
- – Ensure corporate responsibility and transparency on all sustainability-related data, and make information available to investors, savers and the public.
As Social Economy Europe Director, Sarah de Heusch, highlighted during the presentation of the Report, “the figures we see in the 8th Report on Ethical Finance in Europe are important because there is still a misconception that the social economy is a risky investment and not a serious player to invest in. Studies like this help dispel those myths by highlighting the tangible and intangible impact of social economy initiatives.”
