In a country struggling with national debt and unemployment, the COVID-19 pandemic has had a significant impact. In these difficult times, who will support sustainable enterprises threatened by the consequences of national lockdowns? Argentinian lawyer Juan Erdocia addresses the important issue of leveraging private investment for sustainable initiatives. He tells us about the difficulties that two local initiatives from Buenos Aires have faced as a result of the pandemic and how they found financial support.
In Argentina, about half the working population earns their living through informal labour. Even before COVID-19, 40% of the country lived in poverty. The pandemic has had the most significant impact on people who belong to these groups, many of whom lack access to such basic resources as health insurance or potable water. Increasing unemployment and rising inflation rates are an everyday struggle for all who work at a low wage and under precarious conditions. These developments also pose a threat to local initiatives that address social and environmental issues in low-income neighbourhoods.
In Barracas, a poor neighborhood of Buenos Aires, a group of neighbours set up a project that provides work for the local population. Together, they founded a cooperative for shoe production called Kbrones, which employs 15 people. As the pandemic hit the country, their sales dropped, preventing them from paying off debts and ordering the tools that they require to continue production. In contrast to larger companies, such smaller enterprises do not fulfill the requirements for a bank loan, as creditors often deem them not profitable enough.
The same is the case for Marcela, co-founder of “Sabe la Tierra”. To promote sustainable production and consumption in the food sector, this initiative organizes markets for local smallholder producers, workshops and other events to share knowledge on healthy and sustainable food. The project had great potential until markets had to close due to COVID-19 response measures, and sales could no longer take place. To keep the initiative going, Sabe la Tierra needed to create an online platform and establish pick-up centres to organize sales, which required additional funding.
Unlike traditional financial institutions, initiatives like the shoe cooperative and Sabe la Tierra have to depend on other sources of funding that do not adhere to the usual measures of profitability. Without them, even successful initiatives with a social purpose like these two examples may not survive a crisis like the one caused by COVID-19. However, financial actors could help local communities and the environment by lending money to such projects. Matías and Nicolas, two social entrepreneurs, have understood this potential. To support other social entrepreneurs and initiatives throughout the pandemic, they have created COVIDA-20, a fund dedicated to providing loans to organizations and enterprises that focus on having a positive social impact.
Both the shoe society and Sabe la Tierra learned about COVIDA-20 and successfully applied for funding. Today, the shoe company is still producing shoes and Sabe la Tierra has created an online platform where customers can order fresh produce and other food products for delivery or pick-up. Providing funding does not only support them, but also builds bridges between the financial sector and action for the environment and social inclusivity. We need these bridges if we want to build a sustainable, nature-positive and resilient future.
While programmes like COVIDA-20 do exist, they are far from being the norm. The demand for blended finance by small actors in this crisis cannot be met by the offer. Even when potential funding is available, many people who run small initiatives are unaware of the possibilities.
Building back better after the COVID-19 crisis needs to be more than just a slogan. Therefore, mobilizing capital to invest in a sustainable future and empowering individuals to save and invest in projects like these has to be our mission. When thinking about investments, we all need to ask ourselves: What world do we want to build with our money?
This blog is the second part of the series related to the International Climate Initiative (IKI) project “Green Economy Transformation in Cooperation with the Partnership for Action on Green Economy (PAGE)". Read other stories to learn more about the project.
