Spain's biggest social impact fund scales up with new debt funding: 'There are huge opportunities'

Impact Bridge is one of the leading impact firms in southern Europe. It was recently selected by the Spanish government and the European Investment Fund to deploy tens of millions euros in state funds around the country, and the VC firm's social impact fund is the largest in Spain. It has four impact funds in total, two with an eye on emerging markets, and the other two focussed on Spain and southern Europe. Three of these funds are debt-based, with the newest fourth being private equity.

Impact Bridge has long made itself known in the impact space for, amongst other things, having this debt-first strategy. Theirs is currently the only private debt impact fund focussed on Spain.

"We believe debt has a lot to offer, both to investors and to companies that are being financed," Benito tells Impact Loop. "Clearly private equity has its space, and it's much needed, but there are times where other sorts of capital are needed."

The benefit to investors, says Benito, is that debt tends to be more liquid and secure. For businesses, debt is a source of funding that doesn’t dilute shareholding and can be tailored very specifically to the company’s needs and growth strategy.

We’re able to build that bridge that is needed in Spain, between the social economy and the impact economy

A focus on social benefits

This strategy goes deeper for Impact Bridge, however, as a lot of the projects they support focus on the social side of impact. These are often co-operatives or family-led businesses that would not benefit from private equity or indeed could not accept it because of their structure.

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The social economy is a big part of Spanish GDP overall, and Benito says their strategy enables them to fund impact projects that other private equity-based impact funds can't reach.

"We’re able to build that bridge that is needed in Spain, between the social economy and the impact economy."

One such example is Moda re-, a textile recycling cooperative, originally founded as a non-profit but since spun out as a fully-fledged social enterprise. On top of the environmental impact of the recycling processes, the company has a strong social focus in its hiring practices, helping to integrate people on the margins or in states of vulnerability, such as immigrants, domestic abuse survivors and ex-convicts.

On top of the benefits of regular work, Moda re- provides various training and support to employees, helping them better integrate into the Spanish labour market, society or both.

"It's really unbelievable the level of sophistication, and it's a profitable business," says Benito. "It's a fantastic project with a strong environmental and social impact."

It's a fantastic project with a strong environmental and social impact

Measuring social impact

Environmental impact quantification is all the rage at the moment, with tonnes of carbon or litres of water saved measured and documented. Measuring the social impact of businesses can be much harder.

Impact Bridge has an academic division which researches various impacts and publishes their findings, hoping to contribute to the body of knowledge on social impact projects for future entrepreneurs, charitable bodies and investors. They also provide other tools to businesses to measure and increase their impact. These kind of measures are needed to bring more capital over to the social side, where it's needed.

"Environmental [impact] generally, the market is more developed, there is already a lot of capital, a lot of non-impact managers that are covering these segments," says Benito. "We give a stronger focus to social because that's where we believe it's more needed. The question is, how do you really capture that social impact in with KPIs? It's not that easy. There are things that you can measure, but you generally don't capture everything."

Approaching impact with care

Benito speaks effusively about the growth of the impact market in Spain, but Impact Bridge also has its eyes on the developing world. He cites one example in South Africa, where they helped finance a blueberry farm that employs mostly women in vulnerable situations. Benito quickly realised there was more going on than could be seen on a balance sheet.

“I could measure the number of employments being created, the salaries, and measure the KPIs, but there were more things there that I could not assess."

Impact Bridge sent its head of academic research out to spend a month working on an ethnographic study of the project, that was eventually published in the Oxford University-affiliated Journal of Social Entrepreneurship.

Looking at impact investing opportunities across the developing world, Benito says this kind of focus on real impact is essential to getting it right. This is especially true of investments in the growing fintech sector, which can have huge potential for financial inclusion but comes with significant risks in terms of data protection and manipulation.

"If [projects are] funded just by traditional VCs that are just looking for return numbers and putting all the pressure and incentives, it can create harm.”

Looking closer to home, Benito says the climate-driven demands for an agri-food transition in southern Europe offer great opportunities, but those similarly need to be approached with care for the wellbeing of the people at the centre of them. That’s where careful monitoring, consensus-building and collaboration come in.

"We can’t just regulate from ivory towers and not take [farmers] into account. We need to have tools and really support them to adapt. There are huge opportunities, but we need to act."Speaking to Impact Loop from in Impact Bridge’s new offices in Madrid, CEO and co-founder Arturo Benito says 2025 has been a busy year so far. The company has been growing, taking on new staff and closing last year with over €350 million ($361 million) under management.