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