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A historical context to social investment or the problem with history is no one ever learns anything from it
Let’s be nice to the French and start with a philosophical and historical context.
We have always had to invent social investment. Back in 1775, so the story goes, a group of Irish canal diggers, the economic migrants of their time, saved pennies in a pint pot mug on the bar of the Golden Cross pub. Their savings let them buy materials to build their own homes. Richard Ketley’s “building society” was born, the first of many and a movement that lasted well into the end of the last Century and despite the best efforts of the carpetbaggers, persist to this day. Even earlier, in 1542, Sir Thomas White founded his charity, to make loans to impoverished apprentices who were too poor to buy their own tools and thereby get into work and out of the worst of poverty.
So old social investment historically was not only about charities or about social enterprises. It was about directly providing finance to people who needed it, who were unserved by the mainstream of their day.
Skipping through history and around Geography, through the Dutch Cooperative banks set up to meet the needs of farmers for finance, which ended up with the Rabobank of today, or the raiffeisenkassen of the late 1800s, which spawned the credit union movement, let us come return to the UK and the modern social investment pioneers. These were Triodos Bank and it UK precursor, Mercury Provident Bank. As an aside, I recall visiting Glen Saunders, the CEO of Mercury Provident in Forest Row or East Grinstead, where they were located at the time, and him solemnly showing me around their modest detached house office, that indeed they had a basement, but sadly there was no gold in it. Nor were there Doric Columns over the front door. I think you could say at that time your money was safe in a bank, though. Also from that time, there was also Ecology Building Society, founded in 1980 to provide mortgages to renovate property to energy efficient standards.
These institutions, the main social investment lenders today, did not distinguish between legal form and say “we’ll only invest in you if you are an asset locked social enterprise, or legally a charity.” They lent money to support the change they and the many ordinary wealth savers wanted to see in the world. They supported environmental causes such as organic agriculture, supporting private farmers, wind and other renewable energy technologies and developments, and energy efficient buildings. They supported fair trade and the early developing world micro-lending movement. Moving into the 1990s, Shared Interest started up. It has some £30m now, in the form of cooperative shares (withdrawable share capital, a kind of exempt deposit) to fund international fair trade and microfinance through Oikocredit. Tradicraft was a founder, which issued shares itself. Jamie Hartzell’s Ethex takes forward this long tradition.
We then had the Community Development Finance Institutions (CDFIs). Andrew Robinson set up the Local Investment Fund, with its regional Community Loan Funds. The dedicated regionally focused CDFIs started up, of which the first was Aston Reinvestment Trust (ART), was set up by Pat Conaty, Chaired by Sir Adrian Cadbury, financed by Barrow CadburyTrust and run by Dr Steve Walker. It was then replicated by Bob Patterson. Early CDFIs, while they may have specialised, did not initially distinguish between legal forms. I was lucky enough to work with ART when they tried to do everything. Microlending, energy saving loans, charity and social enterprise loans and SME loans to the inner city businesses that the mainstream banks could not or would not serve. Thankfully, Steve Walker focused ART and it is a successful lender to SMEs in inner city Birmingham to this day. Microlenders such as Fair Finance, Street UK and many others set up and the credit union movement established and grew. Ordinary people saving with each other for ordinary small loans.
On through the late 1990s, with CAF Bank, pooling charity deposits to get a better rate, to Unity Trust Bank founded by the trades unions and the Cooperative Bank, and then Investors in Society, which turned into Charity Bank in the early 2000s.
All this, before 2000. Indeed, it is why Gordon Brown asked Sir Ronald Cohen to set up the Social Investment Task Force – here was a movement, what was needed to make more of it? Out of that Task Force came the first private socially focused tax relief, the Community Investment Tax Relief, which helped entities like Charity Bank grow their depositor base strongly (the Social Investment Tax Relief of 2014 might have a greater impact). The Task Force push for bank disclosure and for the establishment of what today is Big Society Capital, to be a wholesaler and market maker. The unclaimed assets (the bank accounts where the banks could no longer find an account holder), following a long civil society campaign, were applied to this wholesaler and market maker, for social sector organisations.
What lessons might we draw from this history?
Ordinary people were at the heart of social investment. People have gathered together resources, of land, labour and capital for social purposes for centuries. Sometimes they were co-operators, forming mutual organisations. Sometimes they formed a “company” of people. Sometimes they set up charities or social enterprises. All of these things were social investment. If we just define social investment as supporting charities and social enterprise, we miss history. We also miss the way that ordinary people gathered together themselves together, founding building societies and other mutual self-help organisations and then went on to help other people. If we view social investment as philanthropy (an excellent thing) or social enterprise (a fabulous breakthrough) we can inadvertently miss out on the root of many of our most extraordinary social investment organisations. Ordinary people came together to solve problems. And they did. And do you know what? Big Society Capital is…ordinary people’s money. It is not government money. It is the bank accounts of ordinary people for whom the “know your customer” truly failed. People who have died, and their bank accounts were not found by their inheritors. People who had no one to leave their funds to. It is that money that we are applying to social and environmental purposes through social investment today. It is not city money. It is not high net worth individual money. It is not the rich and the famous. It is not government. It is not big business. It is ordinary people. And all of those others – government is us, the taxpayers. Companies are us – the consumers and shareholders. The rich and famous – well, Andy Warhol claimed we can all be famous for 15 minutes.
Perhaps if we added all the money we might earn in a lifetime and compressed it to 15 minutes we’d be high net worth individuals too.
Why history is important is that you find history happening today.
Read part three: Social investment - it's a systems thing
This blog is number two in a series of five looking at Understanding What Social Investment Is