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Successful social organisations who create huge social good need a social investment market to match

Nothing beats getting back out into the field to meet social organisations in their own space and listening to their description of their needs and their opportunities.

Writing the report Making Good in Social Impact Investment has been a great chance to do just that over the last few months. Getting into the messy, diverse, concrete reality of the sector. In doing so we found that the UK is at a watershed moment.

This country boasts a generation of brilliant social entrepreneurs who combine social motivations and values with business acumen, who manage risk every day and see the transformative power of social investment in their organisations. That’s important because from an investor’s point of view it’s people you invest in more than organisations.

Entrepreneurs just want to be treated like any other SME and feel a bit patronised by worries about “investment readiness”. They want a broader, deeper social investment market, with more investors and more funding products, that rewards success, offers follow-on funding, allows more successful organisations to escape the “hamster wheel” of continual one-off funding and means that fewer of them have to confess, like one chief executive, that “we can’t be strategic because we just have to go where the money is”. Successful social organisations that create huge social good need a social investment market to match.

We also found a social investment asset class that is fit to be seen as an emerging market. It’s got a visible developing investment track record – of organisations servicing investments and achieving blended returns, of risk levels that are not low risk but are assessable risk, non-black hole risk, and with a growing number of success stories of leaders and their organisations. In risk-return terms, that’s a prospectus for investment.

Understanding it as an emerging market matters because it establishes what needs to be done to keep it emerging. Other emerging markets have emerged and we can follow their example: back successful leaders and their organisations with follow-on funding; more access to advice for them and their boards on using social investment; establish the value of existing social investments by a landmark transaction or two (a good role for Big Society Capital – securitise or refinance an existing portfolio?); establish structures for collaboration as well as competition between social investors; and above all make sure that the statistics that make up the aggregate investment track record of this emerging asset class are collated, published and as transparent as possible.

My conclusion – the glass is half full and social investment has moved beyond the policy stage to execution. The way to take social investment forward now is by doing it. And it’s social investors not mainstream financial investors who’ve got to keep this going. More of us doing it – growing the pool, mixing together social and financial backgrounds, experimenting, sharing experiences and always learning from experience. Building on the investment track record that will make social impact investing an emerged and not only emerging asset class.

Dr Rupert Evenett is a non-executive director of The Social Investment Business and co-author of Making Good in Social Impact Investing available to download free

  • Dan Paskins

    Dear Richard,

    Thanks for your article. Through our Building Capabilities approach, we are providing £6 million in targeted support to local and specialist infrastructure through our Assist initiative, leveraging more than £37 million in support for voluntary organisations from the private sector via Business Connectors, and making at least £20 million available which frontline voluntary organisations will be able to use to choose and pay for high quality support services. It is arguably somewhat hyperbolic to suggest that these measures will lead to ‘the end of infrastructure’ or ‘exacerbate the problem’ of spending cuts in the public sector!

    In response to your specific points:

    1. I don’t agree that frontline and infrastructure are being ‘played off’ against each other. The report clearly notes that in many areas – from support for the underlying principles to sharing learning to key support needs – there was a great deal of consensus between respondents from infrastructure and frontline. In developing this approach, we’ve drawn on learning from working with thousands of frontline organisations. It shouldn’t be any great surprise that some frontline voluntary organisations have had some poor experiences of support from infrastructure, or that they are confident that they know best about the support that they need to flourish, for example.

    2. Our approach is intended to complement that of other funders, local as well as national. As page 8 of the report puts it:

    “Our approach is not an attempt to write a strategy for the whole of the voluntary sector about the single ‘correct’ way to build the skills and confidence of the sector. It is focused on where we think that we can add the most value through our funding, grant holders and relationship with sector. Our approach is intended to complement that of other funders who allocate their resources in different ways.

    For example, a local infrastructure organisation might receive core grant funding from the local authority or other local funders to provide a collective voice on behalf of local voluntary groups, and also offer support services which frontline organisations which receive a grant from the Lottery choose to pay for. A diverse range of funding approaches from different funders is likely to ensure the greatest sustainability of high quality services.”

    We are not arguing for a purist ‘demand-led world’ in which absolutely every support service is paid for by frontline voluntary organisations. We think that there should continue to be a diverse range of sources of funding. BIG has never been the biggest funder of local or national infrastructure and we can’t act as a ‘funder of last resort’ in every area where local or national government has withdrawn funding. Instead, we’ve taken some decisions about where we think our funding can make the greatest difference in order to help fulfil our mission to help communities and people most in need. If BIG is as influential as you believe, local public sector funders will take our advice and provide core funding for work such as collective voice for the voluntary sector!

    3. In terms of peer learning and access to free sources of information, these will be key features of the new BIG Assist initiative, which we are funding and NCVO are delivering on our behalf (more information at http://www.bigassist.org.uk ) Local and specialist infrastructure will be able to use this resource in order to get expert help in order to develop new ways of working, and to share learning and support each other. For example, we know that some local infrastructure organisations have developed excellent links with their local authorities. Through Assist, they will be able to share their knowledge about how to do this effectively with people in other areas where relations are more challenging.

    Assist will also develop an online menu of support services, which will help support providers which offer high quality services to make people aware of these and generate new income.

    We’ll also continue to monitor areas where information might not be sufficiently available. For example, we think that there is a specific need for us to invest around social investment to help voluntary organisations which are interested in social investment develop their investment readiness.

    4. One of the many good things about the Building Capabilities approach is that it will give our Funding Officers and local teams to have new opportunities to work with applicants and grant holders to help them fulfil their potential. We’ll be testing and learning about different approaches and the best ways to do this over the forthcoming months and years.

    5. We’ve based our approach on an analysis of the current capacity of the sector, including the consultation, a series of regional events, biannual surveys of support providers, delivery of BASIS and TLI grants and a wide array of other sources of information. We know, for example, that the situation is very different in different localities, that many support providers have been increasing the income that they generate and that we can’t attempt to meet every single possible need.

    One last comment for now (I eagerly await part two of your series!) We’ll be trying different approaches and making sure that we learn about how these work in order to have the greatest impact. We know that these are tough times for voluntary organisations, but Building Capabilities is part of our efforts to help voluntary organisations to build their skills and confidence, meet challenges and make the most of new opportunities. I hope that you and others will work with us as we develop this work, and continue to help us make sure that far from exacerbating any problems, it creates new opportunities and helps the ultimate beneficiaries – communities and people most in need.

  • Liz Riley

    An interesting discussion.

    How can infrastructure organisations will develop skills for the a future which will ineviatably be very different. Just think about the changes to the way we work caused by IT developments, broadband and 3G etc and the immense untapped possibiliites for even more new ways of working using them and their successor technologies

    I’m concerned that some support seems to seek to rebuild old ways of supporting hit by cuts, rather than looking to the future and seeking new and innovative solutions.

  • James Renton

    Dan

    I was intrigued by your statement that BLF is “not a ‘funder of last resort’ in every area where local or national government has withdrawn funding”.

    You are absolutely right the you are not a ‘funder of last resort’ but you are also partly culpable for the current funding shortage as you also made the decision in the same as local and central government not to maintain former levels of investment available under your previous BASIS scheme to support infrastructure bodies.

    Do not get me wrong BLF went a step further than some agencies by providing transitional cash but at the end of the day BLF made a deliberate strategic decision not to maintain levels of funding just as some local and national government agencies have also done!

  • NORBERT LIECKFELDT

    Never having run a large organisation (and £4m counts as VERY large in my books) I can’t say whether one’s more rewarding or scary than the others, but running a small one scares the hell out of me because we often don’t know whether we’ll live through the next six months.

    • Debbie Walker

      Jackie – I understand what the thrust of the article is but £4 million turnover is a large charity – a £40 mil turnover is giant size!

      I think we really need a discussion in the sector about our perceptions because when we are describing a £4mill turover as a small charity then we’ve really moved away from our roots

      • Jackie Ballard

        Hello Debbie
        Size is all relative! Compared to my two previous charities – the RSPCA and Action on Hearing Loss – Womankind Worldwide is small, but I take your point that we are large in comparison to the majority of charities. I was also thinking of size more in terms of staff numbers than in terms of turnover. Our roots, of course, lie in volunteer led charities without paid professional staff and many charities have, in the purest sense, moved away from that.

        Perhaps all leadership is scary!
        best wishes
        jackie

  • I think that the frustration of running a smaller charity (our turnover is just under £1m) is that you can get so bogged down in operational detail that you don’t have time or headspace to do the visionary thinking. I love having daily contact with our service users (which I didn’t have working for a large charity) and I like the kind of camaraderie I can have with staff and volunteers, and I know the same is true of my two senior colleagues; but I’d love us to have more resources so that we could really each play to our strengths!