This week we had a milestone for social investment to support the development of charities and social enterprises.
We were delighted to hear of extra dormant accounts funds for youth, financial inclusion, and specifically relevant to us, for social investment. This includes £25 million for Big Society Capital and £10 million for Access – the Foundation for Social Investment, on top of the last £100 million to complete the £400m originally committed by Government back in 2012.
Social investment in the UK is growing rapidly – between 20% to 30% pa over recent years. Big Society Capital itself has already committed over £380 million and almost £200 million has been drawn down by charities and social enterprises, to boost their work to improve people’s lives. Add in the co-investment levered in, and it’s over £1 billion made available and £600 million drawn down. More than 600 front line organisations have received investment, from small loans to local charities, through accelerators for new social ventures, to major initiatives tackling poverty, homelessness, resources to disadvantaged communities, and much, much more. Take a look at Geetha Rabindrakumar’s recent blog.
There are still many challenges to be tackled in the social investment field – not least affordability, with so many charities and social enterprises squeezed on their revenues whilst social needs increase. And social investment is not a panacea – it’s just one tool in the toolbox to address social problems, a tool that works for some but by no means all. The series of “gritty reality” blogs on our website show how social leaders have engaged with social investment – or indeed decided it’s not for them. And www.goodfinance.org.uk is a great way to find out whether it might be right for your charity or social enterprise.
So, these extra funds: what will they deliver to improve lives in the UK?
Back in July, we launched a new strategy that focuses on areas where we believe social investment can have the greatest impact. The new funds will enable us to deliver larger and also more innovative solutions in two key areas of that strategy: supporting communities to improve lives, and providing homes for people in need.
The challenge of finding homes for people in need is huge and requires every avenue to be explored. What we can do through social investment is to innovate and break new ground, and also to address the housing needs of some of the most vulnerable people.
With the news of an additional £25 million from dormant accounts above the original commitment, we will be able to try more innovative approaches. The aim will be to address areas of “market failure” - areas where commercial investors may not know what the real risks are, because they don’t have the evidence or track record to go on. We can create exemplar funds, showing what works and what the actual risks are, so that over time the wider investment market will have the confidence to replicate the model, creating a sustainable market in the long run. We have already invested in housing for more vulnerable people, for example, Golden Lane Housing’s charity bond.
We are keen to pursue innovative housing models for people with higher support needs, given the potential for very high social impact. We believe there are opportunities to invest in order to replicate or scale models that enable more vulnerable people to better meet their needs. But we also recognise that there are barriers to sustainability and replication, particularly where revenue streams remain uncertain. We will therefore seek to work with commissioners and providers to unlock new homes for vulnerable people, developments that otherwise would be seen as high risk by potential co-investors because of uncertainty on the revenue.
As with our communities work, evaluating new models and learning from them will be important. We will be setting high standards on impact measurement for all our funds, and will be working to develop a set of impact measurement tools and approaches that can be replicated across the housing sector, developing much greater consistency in how different investment funds measure impact and allowing investors to compare performance more effectively. We believe this will provide a strong basis both for attracting co-investors and for commissioners to judge the effectiveness of different models that they can pursue.
Over the coming months, we will be undertaking more work with providers and commissioners to identify those beneficiaries and interventions that have the greatest potential to grow their impact through investment. If you would like to get involved in this process, please get in touch.
Alongside our specific investments, we will play a market championing and co-leadership role around social investment in homes. We have made a start on this: we have recently launched an innovation challenge with the National Housing Federation, which both demonstrates our commitment to the housing field and sets a good precedent of working closely together with others.
Places and communities
There will be three key ways in which we will use some of the new funds to help contribute to stronger communities and reduce poverty and inequality in places across the UK.
First, our work with Access on the Growth Fund: blending together grant and repayable investment can be an effective way of funding smaller, more risky and more innovative proposals. We will work with Access to create a new strand of blended funding for place-based investments that would not otherwise be viable, such as investing in very early stage organisations or small-scale local projects. Access has made great progress in learning and evaluation through the Growth Fund, and as the findings from that become available we will incorporate them into the new funds.
Second, it’s vital to coordinate with other agencies and with local leadership to make place-based work succeed. We intend to use our capital and skills as a catalyst for bringing together different partners with different skills and resources needed – expanding the set of tools the groups have at their disposal can make effective collaboration more likely to succeed. We will make the likelihood of forming a successful collaboration one of the key criteria in choosing the places in which we will work. In parallel, Access is developing the next phase of its capacity building programmes and intends to deliver some of this within a place based context. This will provide additional support in the chosen areas.
Third, we believe that building in evidence and evaluation will be important as we try new ways of delivering funding to specific places. We are looking to include an evaluation element in funds we are currently developing. Access will consider whether a small part of the grant element in the blended fund could be allocated to evaluation and evidence building, consistent with their wider strategy of promoting learning across the social investment market.
Taking a place-based, systems approach is an important way of addressing the most pressing issues of our time: poverty and inequality. In addition, policy positions like devolution and the industrial strategy have led to greater autonomy for geographic areas over economic levers and public services, leaving an opportunity to influence and ensure the VCSE sector has a role to play. We believe we can deepen our impact if we focus our efforts on certain places, developing a model for change that can be replicated elsewhere.
There are many social challenges in the UK. Social investment can help tackle some of these, along with other organisations in common cause. Confirmation of the further dormant accounts money puts Big Society Capital in a strong position to help more charities and social enterprises to improve the lives of people who really need their support. We look forward to working together to make this a reality.