The European Training Foundation and the European Commission’s Joint Research Centre (JRC) are pleased to announce the publication of a new joint report: Exploration of impact investment for skills creation - Existing actions, emerging trends, implementation modalities, best practice.
This report provides an overview of impact investment and skills creation in the area of innovation, covering the main features of impact investment, the historical development of the phenomenon, and how it can be linked to the skills creation process.
Focused on the Western Balkans region, the report examines how impact investing can be used to address the gap in skills development, by redirecting investment towards innovative SMEs and their skills ecosystem. After looking into how impact investment has already been used for skills development in some European innovation systems, it explores how it could be applied in the Western Balkans.
The study defines impact investment by three criteria: intentionality, measurability and additionality. Its positive social impact must be a direct consequence of investment, it must be able to be gauged objectively, and it must be shown that it would not have occurred otherwise. Impact investment is not philanthropy; the fact of generating financial gains is its prerequisite. But it incorporates non-financial objectives too, like sharing value among targeted stakeholders. Impact investment's initiatives represent a new alignment of public and private interests. Such investments lie on a spectrum, where at one end of it they bring exclusively financial returns, and at the other end the focus of returns is exclusively on social impact (philanthropy).
The report presents some novel initiatives in the field of impact investment from EU Member States. The report finds that InvestEU can offer a framework to accelerate the development of human capital for innovation, with social impact and skills development explicitly featured in its Investment Guidelines. The report concludes that although the impact investment market has important potential to foster skills development, it will need further development for maturity and acceptance to deliver on that potential.
The report goes on to refer to the skills gap in the Western Balkans. The lack of relevant skills is a major obstacle to innovation, and the provision of further initiatives to invest in human capital is a constant request. SMEs are the backbone of growing economies, so supporting SMEs is the key to ensuring growth, innovation and job creation. But middle-income countries like those in the region need a certain level of human capital to be able to supply the technical, managerial and marketing capacities required to boost production processes and stimulate innovation.
So what instruments can be used to help build sustainable skills in the Western Balkans? The report suggests revisiting and enhancing current financial instruments, such as the Western Balkans Investment Framework. Supported by international donors, the Facility aims to enhance access to finance for SMEs via bank loans at improved conditions and access to targeted equity investment. Expanding the platform's services can help promote inclusive skills creation initiatives in the region, and nurture nascent regional innovation ecosystems. Small Enterprise Assistance Funds also offer a means of providing equity and quasi-equity funding, via strategic collaborations with financial partners.
But new instruments also will have a role to play in developing an impact investment market to support skills development in the Western Balkans. Among them, is the Economic and Investment Plan for the Western Balkans which offers many new opportunities for the region. In this way, existing instruments and frameworks can combine tools and create new ones, but their effective design and implementation will require political commitment and the broader engagement of the private sector in skills development.
In conclusion, the report's recommendations for policymakers fall under three broad headings. Firstly, new financial tools need to be tailored to the skills need of the Western Balkans.
Second, strategic planning and monitoring is required. Measuring the social effects of impact investment will require adapting the approaches currently used by financial institutions. The report recommends using strategies like smart specialization and technology transfer policies and activities to move SME skills forward, and tailoring training to local needs for SME skills-building in the region.
Third, specific measures are necessary for SME training. New initiatives for SME funding should leverage on both equity and debt finance. Intellectual property and technology transfer should be a key consideration for innovative SMEs in their business decisions. And innovation ecosystems – especially when designed as clusters – offer an effective way of meeting the challenges faced by the SME sector.
If these challenges can be tackled successfully, the report concludes that impact investment can play an important role for skills development and retention in the Western Balkans, and supporting the creation of high-value jobs.
Link to the report: https://www.etf.europa.eu/en/publications-and-resources/publications/exploration-impact-investment-skills-creation-existing
Please log in or sign up to comment.