After the Gold Rush – The Report of the Alternative Commission on Social Investment

Some readers may have noticed that there hasn’t been a blog post here for a while. That’s not because there hasn’t been anything going on in UK social enterprise, it’s because I’ve been working on a project called The Alternative Commission on Social Investment. The press release below explains what it’s all about.

Our report is out now: the full version is here and there’s a shorter version here.

It would be great to hear what you think – either via email or below.

Normal blogging service will be resumed shortly.

NEWS RELEASE – FOR RELEASE AT MIDNIGHT THURSDAY 26th MARCH 2015

Commission proposes more open, social and responsive alternatives to rescue social investment from hype and hubris

In a report After the Gold Rush published today, Friday 27th March, the Alternative Commission on Social Investment called for less hype, greater transparency from investors, changes to Big Society Capital, and a more principled approach to social investment which puts charities and social enterprises at its heart.

The Commission explored, through a series of roundtables, interviews and research, the access to finance needs of social sector organisations and whether social investment, as currently conceived, can meet that need. The report proposes 50 ways to make social investment more successful and more social.

Through its work, the Commission sought to be more inclusive, more diverse and less London-focused than much of the social investment industry. The work of the Commission Team was guided by 14 Commissioners, all of whom have some interest and knowledge of social investment but who offer diverse experiences and perspectives.

  • Commission Secretariat and Managing Director of Social Spider CIC, David Floyd said “We often hear from Ministers, champions of social investment and the G8 that the UK is a world leader in social investment. Yet for charities and social entrepreneurs here in the UK, it doesn’t feel like that. The Alternative Commission on Social Investment was set up to ask why and to make some practical suggestions as to how things could be improved.”
  • Caroline Mason, Chief Executive of Esmée Fairbairn Foundation said “I welcome the publication of this timely and revealing report. Social investment is a wonderful tool but to enable social change we need to improve and develop on its execution. If social investment is to help charities and social enterprises improve the quality of people’s lives across the UK, then their voices need to be central in policy, market and product development.”
  • Professor Alex Nicholls, one of the Commissioners and Professor of Social Entrepreneurship at the Saïd Business School, Oxford University said “Since the financial crisis, we have seen increasing interest in how capital might be harnessed for social good. But the danger here is that we simply recreate models from mainstream financial markets and expect them to work in the social sector, while at the same time letting social values succumb to the power of capital. Instead, we need fairer, more open and inclusive investment models that can help tackle inequality.”

Recommendations

The Commission’s 10 key recommendations are (see report for full wording):

  1. Social investors, including Big Society Capital to go much further in publishing information about the investments they make.
  2. Social investors to be clear about how social aspects are weighed up in their investment approach.
  3. A reconsideration of the role of Big Society Capital, prioritising its impact over its own existence.
  4. Unravelling the mix between ‘the people’s’ Unclaimed Assets and money invested by the Merlin banks to allow Big Society Capital to better meet demand.
  5. Politicians and advocates of social investment to minimise social investment hype.
  6. Government policy to move away from looking to grow the relatively tiny “social investment market” for its own sake and focus instead more on the needs of charities and social enterprises
  7. The development of a set of defining principles for truly social investments
  8. Social investors’ approaches, staff and locations to better reflect and understand the market they are seeking to serve.
  9. A Compare the Market or Trip Advisor type tool which enables charities and social enterprises to rate their experiences of social investors.
  10. Large charities and social enterprises to invest in other social sector organisations through peer-to peer models.

Ends

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3 Comments

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3 responses to “After the Gold Rush – The Report of the Alternative Commission on Social Investment

  1. A nudge in the right direction hopefully, for those who have any hope remaining.

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  2. Just finished reading the paper, well done!

    My first thoughts are – the recommendation re: increased openness about how deals are structured is bang on.This is a big obstacle and is one of the many cultural carryovers from the financial sector, where protecting both confidentiality and competitive advantage is key . Many social entrepreneurs are working in a good practice vaccuum and can’t properly forecast the likely financial impact of a social investment for their boards when they can’t have access to a body of practice and precedent to study. This forces entrepreneurs into working with intermediaries, keeps them de-skilled and in turn reinforces the London-centric nature of the industry.

    I also believe you’re spot on that the role of BSCG has to be reconsidered.There have been some significant grants made for the development of infrastructure or intermediary organisations which really don’t bear scrutiny. At the same time entrepreneurs have been excluded, largely, from accessing grant capital to develop propositions. Being a market maker for this new industry was no easy task – but the imbalance is now undeniable – and I would love to see a summary of what BSCG has spent, in what forms and on what terms, with all of the London-based agencies with which it has worked.

    I would also like to see greater investment in developing what was always intended to be the purpose of social investment which was creating instruments which linked to impact. There has been a disproportionate investment in finance sector intermediaries, compared to investment in impact professionals from the social enterprise sector. Many in the financial sector, it seems to me, have been trying to work from a blank sheet, trying to reinvent the wheel. A number of impact methods have appeared which I don’t think take the sector forward any more than SROI for example had achieved in the noughties.

    Re social enterprises and charities though – I think that many of the problems of the social investment sector have been created because charities, and in particular charitable infrastructure organisations, were able to elbow their way in to the process. Social investment was intended for social businesses, not as a replacment for grants and donations, but as a source of sustainable finance for suitably constructed organisations. I think it’s only because we have been forced to consider the “needs” of charitable organisations that the social investment offer seems ill conceived – it was in fact quite well conceived, if we had stuck to working only with social businesspeople in the early development stages. Once impact-based investment instruments were developed these would clearly be an option for many charities – but they should not have been able to so heavily influence the early stages of a process which was in part brought about because of the perceived weaknesses of the chaitable model.

    But all in all a great contribution and I’m so glad that people like yourself are working to wrest back control and influenceover this industry to the social enterprise side. Well done again!

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    • I agree with this point about social business, Paul. In fact the benefit of deploying this approach over charity was a key point of our 1996 position paper
      To be clear, I’m talking about an autonomous business which uses profit for social benefit while distributing no dividends.
      Moving away from London centricity I was engaging online recently with the social economy group at York St Johns University They were intrerested in my views on the social economy with regard to higher education and I introduced them to our efforts in Sumy and Kharkiv national University where we’d developed a proposal for a social enterprise development faculity and social investment fund under control of an independent panel of civic activists and human rights orgs. This was back in 2006 .
      YSJ asked how this was progressing and I had to report that it never happened. We were trying to engage with people who had other agendas and vested economic interests..
      We have much the same here in the UK where the prectioner’s voice is frequently censored. Hence the deployment of funds which can never reach where they’re needed most.

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