Ethical finance

Funding is a key element within the framework of the social and solidarity economy (SSE). A lack of funding is often an obstacle to developing viable projects.

Bearing in mind the key role played by new project funding, Barcelona City Council is working to maintain a stable collaborative framework with the ethical finance system. The objectives are to build a new funding culture, increase citizen awareness of ethical finance and bring the ethical finance system closer to the SSE and other specific sectors to increase its use.

Agreement between Barcelona City Council and the cooperative Coop57 SCCL establishing a municipal credit fund to finance new projects and new lines of activities of companies in the social and solidarity economy, with a line of credit of up to 3,500,000 e

Since 2017, Barcelona City Council and the cooperative Coop57 SCCL have had a partnership agreement through which the municipal fund to promote access to funding for social and solidarity economy (SSE) projects was created. This fund has been renewed and enlarged several times, and currently has 689,000 euros provided in equal parts by the City Council and the cooperative to facilitate the funding of new social and solidarity economy projects and new lines of activity in existing social economy companies.

This fund enables a 3,500,000-euro line of credit to be kept open, with funds from the cooperative Coop57 SCCL to finance investment and treasury projects within the city’s social economy projects.

Specifically, the financial instruments set up for social economy organisations and companies are the following:

Real estate investment loans. These are loans to finance real estate projects and investments.
Credit policies and cash financing products geared towards funding short-term operations. The time limit for this service is twelve months.
Liquidity loans. These are loans to be repaid in monthly instalments to provide liquidity to social and solidarity economy entities.
Advances of subsidies, invoices and agreements with public administrations. Loans to advance the amount of subsidies, invoices and agreements with public bodies.
Investment loans for energy-related projects. These are loans to fund long-term projects and investments related to renewable energies, energy efficiency and, generally speaking, projects that foster a shift in the energy model towards sustainability and the democratisation of energy production, commercialisation and consumption.

This line of credit is governed by the sustainability criteria of ethical finance. To this effect, companies and organisations must be committed to and interested in cooperativism and democratic, collective and self-managed ways of organising work. The organisations may not have a salary range higher than a ratio of 1/3, although in exceptional cases such as organisations with many workers this ratio can be raised to 1/5; they cannot engage in any activity that is clearly harmful to the territory and the environment or that promotes an energy model based on non-renewable energies; and they cannot have labour conflicts regarding business practices that clearly violate workers’ recognised rights.

Regarding their legal status, in line with the goal of funding organisations within the social and solidarity economy, only cooperatives, employee-owned companies, associations, foundations and job-placement companies will receive funding. On an exceptional basis, freelancers may also receive funding, provided the economic activity they perform is aligned with the principles and practices of the social and solidarity economy and it cannot be carried out under other collective legal formula. The freelancers must also prove that they are associated with social and solidarity economy networks and that their projects therefore have a collective dimension.

From 2017 until December 2022, the municipal fund project for access to funding for social and solidarity economy projects enabled 162 projects to be provided with funding totalling 7,086,771 euros. The loans have enabled new SSE start-ups and activities to be created which, in turn, have led to the creation of 200 jobs. The instrument has been useful for social and solidarity economy organisations in the city within the context of a pandemic and an economic crisis, and it is expected to remain useful within the current context of inflation and the energy crisis.

Agreement with the Fundació Finances Ètiques, Economia Crítica i Activisme to promote an impact fund to strengthen the development of the social and solidarity economy in Barcelona

Barcelona City Council and the Fundació Finances Ètiques have a partnership agreement that has supported the creation and development of local companies and businesses with a social, economic and environmental impact. The agreement has enabled the creation of a fund of up to 300,000 euros, which makes temporary disbursements into the share capital of social companies to support their growth and boost their equity. It also allows for equity loans to be awarded by the same foundation. The foundation manages the funds based on calls for applications launching mentoring itineraries so that the companies can structure and expand their equity and connect with other realities within the city’s solidarity economy.

Work lines

The fund is implemented via three lines of work:

Share capital line. The amount invested can range from 10,000 to 30,000 euros, with a ceiling of 25% of the entire share capital. The due date is associated with the disinvestment plan approved by the monitoring committee that follows the progress of each operation.
Subordinate funding line. These operations are subordinate loans: their formal due date is longer than five years or is when the cooperative is dissolved. The minimum and maximum amounts are 3,000 euros and 200,000 euros, respectively.
Business mentorship line. Each operation is formalised by means of a regulatory agreement defining the methodology and cost of the tracking and mentorship. The mentorship is geared towards helping the company boost its equity.

Criteria to benefit from these loans

Beneficiaries include cooperatives, foundations, associations, employee-owned companies, benefit societies, special work centres, job-placement companies and, regardless of their legal status, social companies whose main missions include obtaining measurable, positive social impacts beyond earning profits for the owners; that produce goods or services in line with their mission; that limit profit-sharing among the owners and allocate most of the profits to attaining their mission; and that are therefore managed democratically and transparently.

The priority economic sectors are:

Social welfare systems: social-health services, social housing, microcredits for care provision.
Energy-efficiency and renewable energies: thermal insulation of buildings, co-generation, thermal solar energy, photovoltaic solar energy, wind energy, hydroelectric energy, etc.
Environment: waste management, recycling of raw materials, circular economy.
Local agriculture and sales of organic products.
Development cooperation.
Sociocultural promotion.
Fair trade.
Social and responsible companies: business activities inspired by the principles of the civil economy, which also consider social, solidarity and environmental criteria (corporate social responsibility).
Activities that promote loans to individuals to meet their basic needs (housing, transport, sustenance, education, etc.).

The Fundació Finances Ètiques guarantees the following when assessing requests for funding:

That the organisation has been in operation and has at its disposal an analysis of its economic feasibility and the key factors sustaining it.
That the organisation has sufficient capacity to return the investment requested.
That the organisation can minimally self-finance the investment needed to launch the project.
That the planned funding is proportional and does not compromise the feasibility and sustainability of the project in the middle term.
That the team of persons promoting the project has the skills, abilities and aptitudes to carry it out.
That the organisation has the permits and licenses needed to perform the activity.

This partnership agreement is a continuation of what remained of the previous 2017-2020 agreement, which was also managed by the foundation and supported seven SSE companies in Barcelona by means of access to loans totalling 845,000 euros.

About the foundation

The Fundació Finances Ètiques, affiliated with Fiare Banca Ètica, is a space where a new economic and financial culture serving citizens is researched, created and promoted. It promotes the principles, good practices and development of ethical financing and the social and solidarity economy.

Any SSE initiative or organisation interested in these funding mechanisms can contact:

Coop57
coop57@coop57.coop
coop57.coop
932 682 949
C/ Premià, 15, Baixos
08014, Barcelona

Fundació Finances Ètiques
info@finanzaseticas.net
936 780 085
C/Còrsega, 495
08025 Barcelona