What’s going on in UK social investment? – part two

In my previous post last month, I suggested that at least two blogs posts that would be needed to (even usefully begin to) answer the question post by the headline.

The first of these was a post: “Looking at developments in the market for small, unsecured loans for charities and social enterprises since 2012 to see whether there’s more of these deals happening and what basis they’re happening on (size of loan, interest rates etc.)

The context for this is the potential disconnect between (a) the significant growth of the social investment market overall (both in terms of the value of total outstanding investments and in the value of investments per year) and (b) the offer to most charities and social enterprise from the social investment market.

Turning up the volume

The first half of my previous blog looked at possible growth in the specific part(s) of the market described as ‘risk’ investment and the different perspectives on what that means.

In this case, it’s useful to begin by zooming out and looking at the shift in the market as a whole over the past four years.

Big Society Capital (BSC)’s recently published impact report claims that the total value of deals in the social investment market in 2016 was £595 million*, up from £213 million in 2011/12. The 2011/12 figures are primarily based on the City of London-backed report, Growing the Social Investment Market, however BSC’s data team have made some adjustments to the figures to reflect some changes in how we understand the market since then.

Supporting a 179% increase in deal flow in less than five years doesn’t seem like bad going. On the other hand, social investment leaders expected far more. As the title suggests, the BSC-commissioned report The First Billion, published by Boston Consulting Group in 2012, predicted that deal flow would reach £1billion by 2016.

The figures for deal flow – the amount of money invested in a particular year – should not be confused with the figure for the overall value of investments in the market (which includes the value of outstanding loans and equity investments made in previous years). The total outstanding investment figure for 2016 on BSC’s market size dashboard is £1.64 billion (of an overall total of £1.98 billion) excluding ‘Profit with Purpose’ investments**.

Half measures

So, the less charitable assessment of BSC’s achievement in terms of deal flow is that they had a target to increase the size of the market by £787 million between 2012 and 2016,  and have only managed to increase it by £382 million.

The assessment, while legitimate, may reflect more on the over-optimism of 2012’s predictions than on BSC’s performance. This blog post, written by NPC’s Dan Corry at the time, makes clear that these the predictions were based on several questionable assumptions – particularly around growth in charity and social enterprise income from public service markets – and these subsequently proved to be incorrect.

The reality, as shown by NCVO’s Civil Society Almanac, is that (with minor fluctuations) charity and social income from government has remained essentially the same over the past five years. It peaked at £15.7 billion in 2009/10 and the latest available figures (2014/15) have it slightly lower at £15.3 billion.

Growing the volume of investment in the social investment market by 179% in this context represents a significant achievement (of something).

Deal or no deal

What’s less clear is the extent to which the increase in the volume of social investment has made it easier for most charities and social enterprises seeking investment to get the investment they need.

One way to look at this is to look at the number of deals taking place in the market. When we look at the number of (meaningfully comparable***) investment deals, this figure has grown from 765 in 2011/12 to 923 in 2016.

So, while the amount of money being invested into charities and social enterprises has increased by 189% since 2012, the number of charities and social enterprises taking on social investment has increased by just over 20%.

This doesn’t invalidate the big increase in investment but it hints at why (as discussed in the previous blog) some sector leaders are concerned that most charities and social enterprises have not benefitted.

Small comfort 

There’s no way of getting a clear picture of how the average charity or social enterprise’s experiences of the social investment market have changed in recent years but one way to get a broad indication is by looking at Social Enterprise UK‘s bi-annual state of social enterprise surveys.

Unfortunately, the 2017 survey is not yet available but the figures below give a snapshot of what was happening in 2011, 2013 and 2015.

In the 2011 survey, Fightback Britain: 

  • 45% of social enterprises said ‘Lack of, poor access to, finance or funding’ was the major barrier to Starting Up
  • 44% said said ‘Lack of, poor access to, finance or funding’ was the major barrier to Sustainability and Growth
  • 25% of social enterprises sought loans
  • 56% got some of all of the loan finance they applied for
  • the median loan applied for was £250,000
  • the median amount received was £200,000.

By 2013’s report The People’s Business:

  • 40% of social enterprises said ‘Lack of, poor access to, finance or funding’ was the major barrier to Starting Up
  • 39% said said ‘Lack of, poor access to, finance or funding’ was the major barrier to Sustainability and Growth
  • 20% of social enterprises sought loans
  • 60% got some of all of the loan finance they applied for
  • the median loan applied for was £150,000
  • the median amount received was £70,000.

In the 2015 survey, Leading the World in Social Enterprise:

  • 58%**** of social enterprises said ‘Lack of, poor access to, finance or funding’ was the major barrier to Starting Up
  • 39%**** said said ‘Lack of, poor access to, finance or funding’ was the major barrier to Sustainability and Growth
  • 23% of social enterprises sought loans
  • 74% got some of all of the loan finance they applied for
  • the median loan applied for was £87,500
  • the median amount received was £80,000.

The messages from this data are unclear. Some themes that seem to emerging are:

  • (With the exception of a big increase amongst ‘Start-ups’ in 2015 that may be explained by changed methodology), the % of social enterprises citing poor access to finance as a major barrier did not change significantly between 2011 and 2015
  • the % of social enterprises applying for loan finance did not change significantly between 2011 and 2015
  • the % of social enterprises successfully applying for loan finance increased steadily and notably between 2011 and 2015
  • the average size of loans applied for (and received) dropped significantly between 2011 and 2013 before increasing slightly in 2015

There’s lots we don’t know. In particular, we don’t know how significant the social investment market was in these changes and non-changes. As discussed here, most investment taken on by charities and social enterprise is not social investment.

In terms of a tentative hypothesis, though, it seems plausible that the fact that the social investment market is growing may have contributed to the growing % of those social enterprises that are seeking finance actually managing to get it.

More or fewer 

It’s much trickier to work out what has happened in terms of ‘risk capital’. As discussed in the previous blog, the ‘risk capital’ bucket includes any social motivated investment not made a bank.

My third blog will look at what some of the specific categories in this bucket – charity bonds, community shares, profit-with-purpose, SITR, social impact bonds and social property – do refer to but for now the point is that they are (with possibly a handful of exceptions) not small amounts of unsecured finance for charities and social enterprises  provided by intermediary social investors (such as CAF Venturesome, Big Issue Invest or SASC).

In 2011/12, when ‘social investors’ where known as SIFIs, the combination of ‘Large SIFIs’ and ‘Small SIFIs’ made 536 investments with a total value of £35 million – an average investment size of £65,000. Not all deals included this figures were either small or unsecured but it’s the area of the market where that finance was primarily located.

The most directly comparable activities on BSC’s 2016 ‘Market Sizing Dashboard’ are ‘Non-bank Lending’ and ‘Equity-Like Products’*****. These categories combined in account for a significant increase in investment value (to £71.4 million) but a decrease in number of deals to 477, with the average investment size up to £150,000.

Without looking at the data in greater depth, it’s not possible to know exactly what this tells us. The wider re-categorisation of different parts of the social investment market mean that it’s not possible to be sure that the number of small, unsecured investments into charities and social enterprises has decreased since 2012 but it seems highly unlikely that it has increased.

But what does this all mean? 

My working hypothesis is that:

  • the current social investment market may be meeting the needs of ‘investment ready’ charities and social enterprises – those already inclined and in a position to take on investment – better now than it was in 2012
  • that (while there some investors + Access attempting to tackle this) those who hoped that the launch of Big Society Capital in 2012 would prompt a significant increase in availability of small, unsecured investments from SIFIs/social investors are understandably disappointed
  • that our understandings both of what’s happening in the newer sub-sections of the social investment market and of the interaction between social investment with the wider markets for finance remains significantly under-developed

I’ll aim to look at the pros and cons some of those new areas in the next post.

In terms of overall conclusions, the analysis in this blog doesn’t answer the big questions about the market for small amounts of unsecured finance for charities and social enterprises but it (hopefully) helps us to understand some of those questions better – while showing that an increase the volume of social investment does not necessarily mean that the social investment market is helping significantly more organisations.

Many charity and social enterprise leaders may be unhappy with this situation but they are not axiomatically correct – the goal of Big Society Capital and the social investment market should not necessarily be to increase the numbers of organisations taking on social investment.

It may be that significantly increasing the volume of investment into those organisations best placed to take it on is a better way of increasing social impact. That’s a debate worth having but not a decision that should be taken by default.



*The overall market size figure is bigger than this at £630 million but the £595 million figure is based on the sections of the market that are directly comparable with those captured in the 2011/12 data.

**This is not a reference to the validity (or otherwise) of investments into Profit with Purpose organisations as ‘social investment’ but a reflection of the fact that these investments are likely to have been taking place in 2011/12 but there is no way of capturing information about them.

***Of the total 1147 deals, 230 are investments into profit-with-purpose organisations which were not captured by the 2011/12 research. It is also likely as that the 765 deals in 2011/12 is an under-estimate as it does not include Community Shares and additional Equity-Like investment that is included in BSC’s revised volume calculation for 2011/12.

****Survey  questions were amended in 2015 to make poor access grant funding and loan/equity finance separate barriers. My figures here include the combined totals which may be overstated compared to previous years if some organisations chose both options.

*****Social impact bonds may have been included in the ‘Large SIFI’/’Small SIFI’ figures but both volume and deal number were insignificant in both 2011/12 and 2016.






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What’s going on in UK social investment? – part one

Social investment isn’t working. There was only £4.5m of unsecured lending to social enterprises in 2016. So said Steve Wyler, trustee of Access: the foundation for Social Investment at the launch of the Connect Fund in mid-June.

Social investment is working very well. Big Society Capital’s impact report tells us there was £306m of ‘risk’ investment in 2016: “versus £20m in 2012, an increase of 15x“.

Social entrepreneurs in Scotland aren’t interested in social investment. Laurence DeMarco from Senscot explains: “What we call social investment is based on an intentional misrepresentation – to which the English govt, is party; namely that the third sector can be sustained through loan finance – when everyone knows it can’t… Substantial social lenders are increasingly rejigging funds to get money out the door – but they’re still speaking to a market that doesn’t exist.

Social entrepreneurs in Scotland are very interested in social investment. This Twitter thread from Alistair Davis of Social Investment Scotland includes the point that: “The Social Investment Scotland team have approved 10 loans in the last 6 wks worth £2.2m- doesn’t suggest a non-existent market.

As a social entrepreneur considering whether social investment is for you or a government minister, Quango boss or grantmaking trust CEO considering whether (or in in what form) to provide more subsidy for the market, you might find all of this slightly confusing.

Is social investment failing dismally to provide charities and social enterprises with risk finance or is there 15 times as much risk finance available now as there was five years ago?

Is Scottish social investment a non-existent market based on a false premise or a distinctive, unusually successful part of the growing UK market?

As an interested, intelligent person not directly involved in these arguments, you’d be unlikely to imagine that answer to these questions might actually be ‘both’.

The truth is out there 

It may seem slightly bizarre that representatives of two organisations with a shared governance structure can have such different perspectives on the facts (as opposed to any analysis of those facts) about what’s happening in the social investment market.

They share an office and coffee-making facilities. If the Big Society Capital team think  there’s 68 times as much risk finance available as the Access team think there is, how come it’s never come up before?

The answer is that they’re talking about significantly different things. Access trustee, Steve Wyler’s £4.5m of unsecured lending in 2016 refers to unsecured loans made by (non-bank) social investor members of umbrella-organisation, Responsible Finance, to social enterprises.

Big Society Capital’s £306m refers to any social investment in 2016 that was not secured lending by banks. That (probably) includes Steve Wyler’s £4.5m but it also includes (amongst others): Community Shares, equity investments, quasi-equity investments, social impact bonds and investments made by banks, funds and individuals into ‘profit-with-purpose’ organisations^.

Which of these figures is ‘correct’ depends very much on what your priorities are. For Steve Wyler, the priority is relatively small (under £250k), unsecured loans for charities and social enterprises.

From his perspective: “If you are working in a poor community and you require a small scale loan and you can’t provide security, the social investment market just isn’t there for you.

Even on that basis the £4.5m figure seems very low – there are several social investors that make small loans to charities and social enterprises but aren’t members of Responsible Finance – but Big Society Capital’s closest comparable figure to this (‘non-bank lending’) was £38m in 2015 and seems likely to be around £50m in 2016*.

Big Society Capital, on the other hand, have a wider perspective on what social investment is for. Explaining their approach, they note that: “Social investment is not a single market or product so we work closely with partners to develop solutions that provide different types of finance to meet the different investment needs of charities and social enterprises and investors. We have aimed to find the appropriate balance of supply and demand in each of the many sub-segments we target, to grow the market and not be the market.

The additional £250m+ ‘risk’ finance beyond ‘non-bank lending’ is (mostly) not meeting the specific needs that Steve Wyler (and many others) believe should be a priority but that doesn’t mean it’s not supporting significant social impact in other ways.

Unfortunately, to give you a coherent broad snapshot** of what’s going on here, it would take at least two more blog posts:

(i) Looking at developments in the market for small, unsecured loans for charities and social enterprises since 2012 to see whether there’s more of these deals happening and what basis they’re happening on (size of loan, interest rates etc.).

(ii) Looking at developments in the market(s) for other kinds of risk finance which aren’t aimed at relatively small charities and social enterprises seeking relatively small amounts of money but are ‘social investment’ aimed at providing finance to support social impact

Given that I haven’t even got time to write that stuff (let alone expect you to read it) my short answer to the question of ‘who’s right?’ is ‘that depends on what you want to happen’.

And my answer to the question ‘what’s going on?’ is: ‘lots of new stuff has been going on in UK social investment since 2012 but, until now, most of it won’t have made it easier for your relatively small charity or social enterprise to get a relatively small unsecured loan.’

The potentially positive news is: ‘as a result of Access investments, many organisations will now have more chance of getting a a relatively small unsecured loan if they want one.’

Disagreeing to disagree 

Viewed from a distance but based on knowing several protagonists on either side, the disagreement between Senscot (and others) and Social Investment Scotland (and others) is not a primarily a disagreement about facts.

It’s an ideological dispute. On one side there is the view that attempting to create a market in ‘commercial’ social investment – where social investors aim to develop a viable business model for investing into charities and social enterprises – is not only practically flawed but morally wrong.

It won’t work (because charities and social enterprises won’t take the money) but also it shouldn’t work (because any charities or social enterprises that did take the money would not be able to pay it back without becoming profitable businesses and diluting their social aims in the process).

On the other side is the belief that, for at least some charities and social enterprises, the money is right and the change in business approach necessitated by taking on the money is also right. That, in some sectors at least, it makes sense for charities and social enterprises who’ve got a proven business model to take on investment so they can become bigger businesses, doing more of what they do in other areas.

Ironically, the Tweeted figures from Social Investment Scotland, when considered alongside the work of others such as Resilient Scotland, suggest that the Scottish social investment market is doing a pretty good job of providing the kind of finance (relatively small loans, often alongside grant funding) that Steve Wyler of Access would like to see more of compared to the the UK market as whole.

But that doesn’t mean the views expressed by Senscot are necessarily wrong. If your focus is supporting (social entrepreneurs running) small organisations with a turnover of under £250k per year (rather than seeking investment of £250k or less), operating in a single local community and just about breaking even with lots of volunteer activity and a few small grants every year, even Scottish-style social investment isn’t much use to you.

I think I’ll go and sit down over there – let me know when you’ve sorted it out between yourselves 

There’s nothing wrong (in the moral sense) with the fact that different organisations and groups of organisations have different perspectives on and priorities for the social investment market***.

One negative alternative, the position of many leading figures in English (some would say ‘London-based’) social investment market between 2010 and 2014, is to avoid discussing differing priorities and promote the idea that ‘social investment’ in whatever form is an inherently good thing that should be supported without question.

But, if we’re trying to make the market easier for charities and social enterprises to navigate, we do have some (collective) responsibility to provide a clear picture of what’s going on so that organisations and social entrepreneurs can understand the options available – and make their own, properly informed judgements about what’s right for them.

While there’s no suggestion that anyone is deliberately not doing that on an individual basis, when current contributions are taken together, the combined picture is a painting of a surrealist’s dog’s dinner.

Part of the solution is more independent data, with clear analysis to explain what that data refers to and clear independent information about products and support on offer. But alongside that, we all have an individual responsibility to be as clear as possible about what we mean.


^For the purposes of this blog, there is no need to know what all (or, in fact, any) of these financial instruments are – beyond the fact that they’re different kinds of investment to the ones Steve Wyler is talking about

*Big Society Capital have not yet published a breakdown of their 2016 market figures. The 2015 figure that is directly comparable to the £306m ‘risk’ finance figure for 2016 is £283m.

**Exploring the detail would need a research project.

***That’s before we even get on to the relationship with wider world of ‘impact investment’






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Leading the world in reports about Social Impact Bonds

Apologies for the lack of posts on Beanbags in recent months. I’m hoping to post some original material later in the week but, in the meantime, here’s some of my recent publications and blogs for other people:

Social Impact Bonds – An Overview of the Global Market for Commissioners and Policymakers: 

The report, supported by Centre for Public Impact, is here.

A related blog for Pioneers Post is here.

Subsidy blogs:  I’m writing a series of blogs for Access: The Foundation for Social Investment on subsidy in the UK social investment market. To be followed by a short report.

Blog one is here.

Blog two is here.

It would be great to hear what you make of the report or the blogs.


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Social investment: where to now?

“Times have changed since social investment first began to be big news in the UK in the New Labour years…” my new blog post for Pioneers Post. 

This blog is part of the build up to an event I’m helping to organise at this year’s Marmalade festival in Oxford next week: Social Investment Now Everything’s Changed

The event will feature introductory provocations from Big Society Capital chief executive, Cliff Prior and Finance Innovation Lab’s Executive Director, Anna Laycock. Then we’ll work out what social investment should do to respond practically to (some of) the major national and global challenges that have arisen in recent years.

It’s free to attend and it would be great to see you there.


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Rip it up and start again

Happy New Year! At least, let’s hope it is.

2016 probably doesn’t need any further publicity but one recurring theme was that it was a pretty good year for the rip it up and start again brigade: not just in global politics but in the social sectors, too.

One of my particular favourites was the conveyor belt of swashbuckling business leaders explaining that current approaches to doing good were rubbish and that charity, government or both should be replaced by people more like them.

Suck it up

One of those change makers most prominently featured on the social investment circuit was Iqbal Wahhab, founder of restaurant chains Cinnamon Club and Roast.

He published a book, Charity Sucks, as part of Biteback Publications ‘provocations’ series and turned up at the Good Deals social investment conference in Birmingham in November to deliver the message in person as part of a conversation with Big Issue Invest Chairman, Nigel Kershaw.  He also joined Pioneers Post for one of their Black Cab Interviews.

Wahhab’s Good Deals contribution was entertaining but light on detail. The most telling moment came when he was asked a question from the floor about how businesses could solve the problem of meeting social needs in situations where the beneficiary couldn’t pay for the product or service being provided. He ignored it entirely and launched into an unrelated anecdote.

But the discussion was engaging enough to persuade me to buy and read the book, which was equally engaging but equally light on detail. Wahhab’s argument seems to be that some charities – including some that he’s been on the board of – have done some stuff he doesn’t think is very good, while growing numbers of businesses are trying to find ways to do social good as part of their regular business activities. And this shows that charity sucks because business does it better.

While it might be a bit much to expect a full plan to replace the entire charity sector in a short book written as a ‘provocation’, Wahhab fails to offer even a basic outline argument for how we might get from businesses following his example of giving all proceeds from a specified table in his restaurant to good causes and providing job opportunities, to the widespread provision of commercially unviable social goods by organisations aiming to deliver a profit for shareholders. There just some fairly anodyne stuff about shared value vs CSR, triple bottom lines and calls for charity donors and philanthropist to be more diligent.

While I’ve worked with many individual charities and charity leaders who I respect a lot, I’m open to the argument that the UK voluntary sector as a whole is currently in a bit of mess and (parts of it at least) could usefully spend 2017 considering what they’re for and what they’re trying to do. And while charitable registration encompasses a wide range of different organisations with an equally wide range of business models, I agree that many of the business models for service delivery charities (particularly local ones) are fundamentally broken.

If you liked foodbanks, you’ll love supermarkets 

The frustration with Wahhab’s contribution, though, is that he completely ducks the argument that he himself raises. How could business do the actual things that charities do and do them better?

Here’s a couple of possible examples that I’ve made up:

(a) Supermarkets are a far more efficient and sustainable vehicle for providing food for people who can’t afford food than foodbanks. Could large supermarket chains be given a universal service obligation so that anyone who would qualify for a referral to a food bank can get the food they need straight off the supermarket shelves instead? Like the US food stamps system but without the government money, just businesses doing it better.

(b) Property developers are keener on building homes than housing associations are and planning permission often depends on a requirement to build a specified percentage of ‘affordable homes’ and make Section 106 contributions to the local community. But why not cut out the social middle people and get these business people to ‘do it better’ by giving that direct responsibility for housing a set percentage of people on the local waiting list for social housing?

I’m not advocating either of these ideas but they’re examples of the kind of thing businesses would need to do if they were going to replace the actual life and death services UK charities provide.

Do charity critics like Wahhab actually want businesses to do that stuff? If not, how is that stuff going to get done? This isn’t an abstract intellectual discussion – it’s a discussion about if, how and where the least well off people in society get to have their dinner.

Government’s finished so I’m replacing it for $1 million  

Fortunately, not all socially motivated business leaders are limiting themselves to the relatively minor task of replacing charity. For ‘the French Bill Gates’, Alexandre Mars, it’s the state that needs replacing.

While the sub-editors of this Guardian interview with the tech entrepreneur turned philanthropist may have slightly amplified his hubris with the headline: ‘States don’t have the money to do good. Business does‘ it’s not an unfair reflection of the general tone of the article.

Mars has a made some money doing tech stuff and he’s putting some of that money into setting up Epic, a ‘philanthropy middleman’ which channels the donations of other wealthy people to charities. So far: “The foundation, which has staff in London, New York, Paris and Bangkok, has exceeded its 2016 target to raise $1m. As a result, each of the 20 charities it has selected will receive at least $50,000.

And: “Next year, a further 10 charities have been selected for support (from 2,000 applications), including two more UK charities, sport-based not-for-profit Street League and east London employment project ThinkForward.

That seems pretty good to me but it’s not immediately clear what it’s got to do with policymakers who ‘don’t have enough money‘ needing business to ‘step up‘.

A useful ‘size of Wales‘-style comparison figure for ongoing social spending in the UK is the budget of an average-sized secondary school. That’s around £4million per year.

The money Mars & co are providing to ‘change systems‘ in social good across the world this year* is enough to fund one of these UK schools for less than three months. The funding he’s putting into UK charities would fund that one school for just over a week.

It’s true that governments in the developing world are now struggling to provide the level of welfare provision that their citizens expect based on the levels of taxation that those citizens are willing or able to pay. It’s clear that business people could play a range of useful roles in solving that problem. It’s less clear that restricted donations of post-tax personal profits – whether by the French Bill Gates, or even the Bill Gates who is actually Bill Gates – is likely to be the most important of those roles.

Where spreadsheets have no aim 

And then, just when many of us working in and around social/impact investment thought 2016 had nothing else up its sleeve, came the exploding cherry on the cake of absurdity: Bono announcing that impact investment wasn’t working and he was turning up to sort it out.

Here’s the intro to the article in the New York Times:

“‘There is a lazy mindedness that we afford the do-gooders.’

That was Bono, the musician turned activist turned investor, lamenting the pitfalls of what has become an increasingly fashionable form of financing: social impact investing.”

By paragraph three the verdict is clear:

Most of these efforts have had mixed results; either investors lost money, or the social impact was negligible or nonexistent.

It has become, as Bono told me, ‘a lot of bad deals done by good people.’

The summary is that Bono, Jeff Skoll and a bloke who works in private equity and ‘resembles a Buddhist monk‘ apparently reckon no one involved in impact investing has ever thought of the idea of an impact fund being quite big and measuring the impact of its investments.

To some extent, as a social entrepreneur, I can see a delicious irony in some blokes rocking up and telling impact investors that everything they’ve been doing for years is a load of sh!t – and they should listen to the real businessmen (and rock star) who know how to do things properly and have finally cleared the space in their diaries to tell us.

But however delicious that irony is, the aftertaste is rank.

Anger and stupidity 

We enter 2017 in a moment brimming over with both anger and stupidity – and we need to find ways to channel the anger effectively and avoid the stupidity.

We shouldn’t accept the status quo but nor should we blithely accept *something else*, whatever it happens to be. Alternatives to the status quo, even alternatives proposed by clever business people and Bono, need to be challenged as strongly as the structures and models they’re seeking to replace because social change worth having is complicated and difficult.

*Value of $1million in £ at time of writing around £817,000


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12 SIBs of Christmas – The 1st Annual World Leading Social Impact Bond Quiz

Social Impact Bonds are a world leading financial instrument launched here in the UK in 2010. Since then we have continued to lead the world in launching them.

Earlier this year, then Cabinet Office minister, Rob Wilson noted that: “Social impact bonds are barely mentioned in the media today” before explaining: “In a few years time they will be the most talked about funding mechanism for government social projects. I will be talking about them a lot.

This is inspiring stuff but as social entrepreneurs we are often reminded of Gandhi’s tip that we should ‘be the change we want to see the world’. There is a small but genuine danger that, for all his gravitas, Rob Wilson may not be able to bring about this change on his own. The 1st Annual World Leading Social Impact Bond Quiz is my small contribution towards our collective impactful effort.

The answers will posted on here sometime next week. If you want to email your answers to me – david (at) socialspider (dot) com – I will compare them to a historical set of answers to a different quiz and decide whether I think you’ve won.

Existential question:

1. Social impact bonds all involve some form of payment by results contract – which (one or more) of the following other characteristics also applies to all social impact bonds launched across the globe before June 2016:

(a) Use of a Special Purpose Vehicle

(b) At least partially financed by socially motivated outside investment

(c) Investors have capital at risk

(d) Described as “A social impact bond”

(e) Presence of a counterfactual measure

(f) Service delivered by a charity, social enterprise or other non-profit

Leading the world:

2. What percentage of all social impact bonds in the whole world (as of June 2016) have been partially commissioned by the UK’s former Secretary of State for Work & Pensions, Iain Duncan Smith: 

(a) 23%

(b) 5%

(c) 12%

(d) 7%

3. Featured on the rate card for a UK social impact bond programme: “Improved attitude towards school – £700” is a proxy for which social outcome:

(a) Increased educational attainment

(b) Improved employability

(c) Reduced risk of committing crime

(d) The success of the UK social investment market

4. Launched in 2014, the Fair Chance Fund was a £15 million scheme to fund social impact bonds to tackle youth homelessness. What nickname was the fund given by investors and charities who were interested in applying but did not want to use the UK government’s preferred special purpose vehicle-based social impact bond model?

(a) Negligible Chance Fund

(b) Reasonable Chance Fund

(c) Cat In Hell’s Chance Fund  

(d) Fat Chance Fund

Saving the world:

5. In 2014, New York Times columnist, Nicholas Kristof appeared to suggest that a major international emergency could be tackled using by social impact bonds. Was it:  

(a) Russia’s action in Crimea

(b) the ebola outbreak

(c) global emissions of CO2

(d) the Greek government debt crisis

6. (Based on publically available data) which of these activities has not yet been the focus of a social impact bond or equivalent financial instrument – or an initiative to create one:

(a) saving the rhino

(b) reducing costs of road trauma

(c) tackling noise pollution

(d) teaching coding to primary school children

(e) improving building & fire safety in garment factories

Guess the investor:

Based on these innovative visual clues, identify the investors in social impact bonds in either the UK or the US:



8. investor2



Talking about them a lot:

10.  Which US Senator, talking about social impact bonds in a 2015 congressional hearing, exclaimed: “I don’t get this at all… I think this is an admission that government isn’t doing what it’s supposed to do. This strikes me as a fancy way of contracting out”:

(a) Joni Ernst

(b) Michael Bennett

(c) Angus King

(d) Ben Sasse

11.  Which UK civil society leader, speaking to a House of Lords committee in 2016, claimed: “The challenge has been the hyperbole around social impact bonds, which have got a disproportionate amount of resources… The government has developed this totem, the social impact bond, and is dedicated to achieving success with it.”

(a)Big Society Capital boss, Cliff Prior

(b) Social Enterprise UK CEO, Peter Holbrook

(c) Esmee Fairbairn Foundation CEO, Caroline Mason

(d) NCVO Chief Executive, Sir Stuart Etherington

12. In March 2015, which then UK cabinet minister hailed “the first trillion” of potential global impact investment:

(a) Nick Clegg

(b) Chris Grayling

(c) Theresa May

(d) Iain Duncan Smith

Merry Christmas and here’s to another year of talking a lot about social impact bonds.


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Metric martyrs

For the few of us still bothering to take an interest in the impact measurement industry’s geostationary orbit of planet earth, there’s been a couple of divertingly divergent interventions from top academics at London School of Economics recently.

First up, my friend Julia Morley, from the Department of Accounting, incurred the wrath of impact consultants’ umbrella body, Social Value UK, with her research blaming “an elite group of social investors” for providing “the main impetus for the adoption of social impact reporting” which “may create dysfunctional incentives for social enterprises” as a result.

Perhaps unsurprisingly, Social Value UK offered a storming social media media rebuttal:

Julia’s full paper, Elite networks and the rise of impact reporting in the UK social sector, merits further reading but I’m respectfully sceptical about parts of her abridged argument, albeit for different reasons to Social Value UK.

Who cares?

For me, the idea that social investors are forcing charities and social enterprises to adopt impact measurement over-estimates both the extent to which most social investors are interested in impact measurement and the extent to which most charities and social enterprises care what social investors think.

Maybe we’re seeing more organisations using the word ‘social impact’ on their website and/or calling their annual report ‘Impact Report’ but, as last year’s Oranges & Lemons report illustrated, there’s not much actual impact measurement being demanded by social investors. And, for most charities and social enterprises, social investment remains an obscure siding in the wider market for finance where nothing of practical relevance is on offer.

Impact measurement is a fundamentally important component of social impact bonds (SIBs – see previous) because it’s baked into the business model. Irrespective of our view on whether SIBs provide good value for money, the value proposition makes sense. The organisation (and investors) need to measure impact so that they get paid, the government needs to measure impact so that it knows whether the contract has succeeded on its own terms.

In terms of conventional social investment into organisations, it’s not clear how impact measurement creates value for anyone other impact measurement consultants. Organisations don’t get a cheaper loan for measuring their impact – and that’s understandable because (in general) social investors don’t get a better deal from wholesale investors for proving impact. It’s often claimed that public sector commissioners are more likely to buy from organisations who can demonstrate their impact but, SIBs aside, I’m not aware of any published evidence that this is true.

What’s the point?

I should make clear that I’m not putting this forward as an argument against the social value of impact measurement. I don’t believe it’s acceptable for charities and social enterprises to have no way of determining whether what they do is/remains socially useful – and the reporting systems advocated by impact measurers are one way of doing that. So there be may good reasons why government, grant-funders or others should (continue to) pay for measurement – but (SIBs aside) the commercial drivers for most organisations and investors to fund measurement themselves are (still) not obvious.

Fortunately, as Dan Gregory noted yesterday, some of Julia Morley’s LSE colleagues have some ideas:

There’s a shorter version here.

As Dan suggests, it’s genuinely wonderful to encounter people so optimistic that their response to the fact: “there has been a rise in the tools available for measuring the social impact of business – to the tune of more than 150 impact assessment methods” is: “In an effort to move impact assessment forward, we propose a holistic, transparent platform – called the External Rate of Return (ERR).

The full situation seems to be that with people primarily on social change failing to do much social impact measurement but creating loads of complicated, highly contested measurement systems that no one uses – so the answer is to create an impact measurement system based on a complicated, highly contested financial measure Internal Rate of Return (IRR) and attempt to get businesses who are not primarily motivated by social change to use it.

As if that wasn’t fantastical enough, the added twist is that the model requires interested members of the general public to turn up a website and vote on the impact data that companies are providing.

On what possible basis would this actually happen? 

If you are not an impact measurer yourself, you probably don’t need to be told that there’s no logical reason why a statistically significant number of members of the general public would turn up to a website and express an opinion on a company’s impact data.

As with many of the specifically social-focused impact measurement approaches, the creators of ERR are apparently focused on creating a theoretical model that would work really well in the event that large numbers of stakeholders on all sides of the equation were interested in it, while seemingly ignoring the question of why those stakeholders might be interested (or not).

While the impact measurement industry is unremitting in its demands, not just for funding but also for changes in the law, there’s ongoing confusion about what problems it’s solving and who it’s solving them for.


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