If you want to know what’s been happening in social investment in 2014, the answer is that Iain Duncan Smith (IDS) thinks it’s going brilliantly and I think the market is experiencing a ‘different level of success’. That’s the headline news in Big Society Capital (BSC) CEO, Nick O’Donohoe’s blog-based review of the year.
It’s an honour that O’Donohoe is taking my views into account in his assessment of the current challenges facing his organisation but (while I can’t speak for IDS) he’s wrong to suggest that I’m one the ‘stakeholders’ continuing to ‘judge success or failure by a rather one dimensional yardstick’.
As regular readers will know, the vast majority of my blogs on social investment over the years have explained why the market is failing at least two different interest groups in at least two completely different ways but O’Donohoe is clearly right to highlight the difficulties BSC faces in supporting the development of a social investment market that works for different people who want different things to happen.
Ironically, the one unequivocal aim that BSC has – to support the development of the social investment market – is a ‘yardstick’ that no one apart from BSC staff and trustees, and possibly few civil servants, is particularly interested in (in itself).
In fact, the main argument for the existence of ‘the UK social investment market’ as a specific sector or space within the UK economy is the fact the BSC exists to develop it and the clearest, if not necessarily the most (socially) useful way of outlining that markets parameters is based on whether or not an activity is something that BSC could invest in.
O’Donohoe’s blog post reviews progress against in priorities areas outlined in BSC’s current strategy (launched in May 2014): small and medium-sized charities; innovation; mass participation; scale. It encompasses a wide range of activities from community shares to hedge fund-led housing investments that BSC invests but which have nothing much to do with each other plus some – such as Nominet Trust’s grants programme – that BSC isn’t involved in.
This not a bad thing. It’s vastly preferable to BSC investing in a narrow range of activities relevant to a tiny segment of the social economy and taking no interest in anything other funders/investors are doing but it doesn’t do much to alleviate confusion about what the social investment market is and what BSC is ultimately for.
For all the positive news in 2014, there is no realistic expectation that Nick Hurd’s claim on BSC’s launch day that: “For many years, charities and social enterprises have been telling government how hard it is to access long-term capital. We have listened and within two years have delivered a new institution that will make it easier” – will ever be fulfilled in the sense that that most observers would understand the terms ‘make’ and ‘easier’.
And Prime Minister David Cameron’s statement that day that social investment: “is a self-sustaining, independent market that’s going to help build the big society” – now reads like a message in a bottle from a land beyond our comprehension.
2014 has seen BSC gradually move beyond its initial failure to get money out the door to distribute its own funds with growing competence primarily (if not exclusively) into funds and institutions intending to make relatively safe asset-backed investments, while also providing some of the financial muscle to back up the government’s (as-yet undimmed) enthusiasm for Social Impact Bonds.
It’s also successfully completed part two of its lobbying operation to secure the introduction of Social Investment Tax Relief, with the eligible limit raised to £5million in the Chancellor’s Autumn Statement.
Alongside this activity, BSC has been furiously seeking ways to outsource the wider obligations bestowed on it by the fundamentally political nature of its creation. In particular, providing finance for small charities and social enterprises (which, in reality, is most of them) – which O’Donohoe told me in February is ‘just not possible’ on a commercial basis.
We’ve seen Big Lottery Fund step in to take some of the pressure off with the (much trailed build up to the) launch of the £150million Power to Change grant fund for ‘sustainable community-led enterprises’.
Behind the scenes, BSC and Big Lottery have also been working together to develop a new institution to work with intermediaries to provide blended finance/mixed-funding products/loans with grants (delete according to taste) to organisations who aren’t in a position to take on fully commercial investment.
While it’s not exactly prizes for anyone, there’s been enough happening to keep enough ‘stakeholders’ happy to keep some kind of social investment show on the road – even before you consider the phenomenal pdf action generated by monumental solution-in-search-of-a-problem of the year ‘Profit with Purpose Businesses‘.
When you add in success stories like community shares, the messier social investment market that’s emerged in 2014 is more useful to more organisations and (hopefully, ultimately) more people than the pointless venture capital tribute act that was on offer in 2012.
It’s less clear what moral or functional principles, if any, hold it together and, as a result, on what basis any forthcoming battles for BSC resources will be fought. Dan Gregory’s question: ‘What’s so social about social investment anyway?‘ has not been answered.
If the UK social investment market of 2015 was a social enterprise emerging from a programme of investment readiness support what would it’s shiny, new elevator pitch be?
Another BSC employee, Development Director, Danyal Sattar, has recently published a series of blogs that provide a brilliant overview of the ‘what’ of social investment but still don’t really address the why.
The Alternative Commission on Social Investment is not going to provide a single, direct answer to that question but hopefully it will provide some useful suggestions on what a more social ‘social investment market’ could look like.
2014 has been a pretty good year for UK social investment. It’s a year that seen most people working in social investment move decisively beyond rhetoric towards doing. In 2015, it may become clearer what we’re doing and why.