Photography source: Jeet Dhanoa on Unsplash
In a context of growing scarcity of public resources and new priorities such as investment in defence, it is clear that Portugal’s true social sustainability will increasingly depend on the role of the social sector and private funding. Traditional philanthropy will remain essential, but it must be complemented by impact investment mechanisms that bring efficiency, scale and long-term commitment. Strengthening the social economy, supporting organisations working on the ground, and encouraging funders to adopt clear and focused strategies are crucial steps to ensure that fundamental rights such as healthcare, education, housing and dignified ageing are not compromised.
We are living through uncertain times, but above all a period of scarcity of public resources to tackle the growing number of socio-economic problems, both globally and nationally. In a country with a strong social heritage such as Portugal, we are now witnessing a shift in public discourse regarding priorities and the availability of capital to finance access to rights estblished in the Constitution. Every day, we see far too many citizens prevented from accessing economic and social rights—such as housing, healthcare, or education—because the State lacks the capacity to fund the necessary conditions for these rights to be fully guaranteed and accessible to all.
One of today’s central issues is defence. Portugal has committed, under NATO, to allocate 5% of its GDP to this area by 2029. This commitment implies one of two options: raising taxes (placing a heavier burden on families and businesses), or making substantial cuts in other structural sectors.
I do not intend here to express an opinion on whether or not investment in defence is necessary. I simply wish to use this subject, currently regarded as a priority, as an example of how our public resources, already insufficient to safeguard all social rights, will become increasingly scarce. In doing so, I aim to highlight how private funding and the work of social economy organisations are, and will continue to be, ever more important to social balance as a complement to public solutions. I therefore reflect not only on the importance of the social sector, but also on some of the approaches that could help strengthen it.
To grasp the scale and implications of our commitment to defence, 5% of Portugal’s GDP represents a total commitment of more than €14 billion to be invested in the defence industry. It is important to note that Portuguese public expenditure in 2024 amounted to around 35–40% of GDP. Thus, speaking of 5% of GDP is in fact speaking of 10–15% of national public expenditure, which necessarily implies cuts to current public spending in other structural areas of our society.
By way of comparison, in 2024 the planned public expenditure in other areas was:
Considering a reduction in investment in any of these areas to make room for defence spending would necessarily mean subjecting citizens to even more precarious public services, rather than better quality and accessibility, in a country that is already among the most ageing and poorest in the European Union. I therefore dare to make the logical leap that this new priority is likely to contribute to the worsening of the difficult social problems we face today.
In the wider public debate on the scarcity of public resources, the role of private initiative in various areas of our economy is often mentioned as a solution. However, it is far less common to hear hopeful discussion about private initiative focused on the work of third sector organisations, the ones on the ground addressing the social gaps left by the economy and the public sector, and who almost always operate in the shadows.
Empowering and strengthening the social sector, which in 2021 was represented by around 68,000 entities, requires diversified funding and resources. Social investors, that is, companies and foundations, play a crucial role in filling the gap left by insufficient public funding.
Although impact investment, this is, financing mechanisms for social impact solutions that combine financial return with social outcomes, has been discussed in Portugal for more than 15 years, the social sector is still mainly financed through traditional philanthropy.
Traditional philanthropy is too important to be considered replaceable. That is not the purpose when we talk about impact investment. Its relevance lies in complementing the current funding dynamic. It brings new incentives for efficiency (resource management) and effectiveness (tackling of problems) for some organisations on the ground, while also enabling new investors and additional capital to be mobilised for social causes.