Over the last five years, we and colleagues across the sector have made a great deal of progress on social investment.
We have experimented with different investment tools in different parts of the social sector, committing £340m of our own capital towards a total of £893m with co-investors. We have built our own organisation and helped others to develop a diverse intermediary network in which there are now three to five times as many social investment professionals as in 2012. We have engaged with the social sector and with co-investors including foundations, high-net-worth individuals, and institutional investors. Thousands of organisations across the UK are using social investment to help people, whether through large, scalable models such as the Real Lettings Property Fund, or through locally developed community schemes such as the Southmead Development Trust.
There are still frailties and there is much more to do, but we are proud of what we have achieved together with our partners.
We recently carried out an external engagement exercise around the future of social investment, and this brought to light several important points. It told us something we’d heard before but much more clearly: the need to focus. Our experience over the last five years lays the groundwork for this. We have experience on ‘what works’, which allows us to focus on what delivers value. With our partners, we have helped build the foundations of the market, which now allows us to spend less time developing the market and more time using that market to deliver social impact. We have launched a series of generalist funds with organisations like Social Investment Scotland, Big Issue Invest and many others, which will continue for the long term, allowing our next rounds of investments to be more focused.
We can also see the need for confidence and momentum, as the value of social investment is challenged in some quarters. This demands that we focus more on areas where we can visibly move the needle on some key social issues, to show the value and role of social investment.
We should be confident about what we and our partners have achieved so far, and about making and justifying choices about where to focus next.
So focus is important, but where should we focus?
To answer this, we turned to the question of our purpose: what are we here for? It became increasingly clear that social impact has to be our core purpose. If you ask any charity or social enterprise, they would say their purpose is to help their beneficiaries – social impact is their purpose and it must be ours.
There are indispensable tools for delivering this primary purpose, notably supporting the social sector, influencing mainstream finance, and developing public participation in social investment. Our role is and will remain to enable others through investment, rather than to achieve impact directly. But we believe that focusing on areas where investment can achieve social impact provides an inspirational call to action, to bring people with us and build confidence and momentum in what we do.
We see our core purpose as improving people’s lives by tackling social challenges through investment.
So how does this purpose shape our future work?
We believe that we do best by focusing more tightly on the issues where there is clear evidence or opportunity that social investment could have a strong impact. This belief is based on what we’ve heard in our external engagement, what we’ve learned internally, and what we’ve seen work in the past.
For instance, the ‘Fair by Design’ programme led by the Joseph Rowntree Foundation seeks to tackle the ‘poverty premium’ – whereby people on low incomes pay more for basic goods and services. JRF are the leading policy researchers in this field, shaping and promoting the programme. Big Society Capital has identified the elements where social investment can help make the difference. The clear call to action has attracted a wide range of partners from foundations to government to media to lobbyists. This has resulted in a much more realistic proposition to achieve substantial impact in this important area of social need.
As in this case, we will build on what we have seen work, to identify specific opportunities. This approach will inform the majority of what we do in the future, but big questions remain. Which social issues will we focus on? How many? For how long? How concentrated?
We will be addressing these questions in the coming months – and we would like to be open and transparent about how we do so. We will seek to engage a broad range of stakeholders as we work towards answering these questions. 2017 will be a ‘hybrid’ year in which we focus on some of the promising areas that we have already investigated, whilst also setting up the framework to engage the social, intermediary, and investor sectors on further ideas for 2018 onwards.
It is worth noting that this focus on issues will not be all of what we do – in fact not by a long way. We will also maintain key elements of the market, such as the general funds we already have out there, including working with Access on smaller loans and with blended finance, and managing our portfolio and the intermediary network that supports it.
We will continue to work with and through the social sector, as key organisations that deliver social impact and have social benefit at their heart. We will seek to address concerns around affordability, in particular by exploring the potential for greater use of blended finance. We will continue to leverage in external finance, including impact first investors, retail investors, and institutional investors. We will continue to experiment, to listen to the broader market, and to be opportunistic where there are ways to deliver breakthroughs.
To recap. We believe this is the right time to focus, and new additional effort will be directed into a smaller set of social issues where there is a good prospect of making a strong impact. We believe this because of our work to date on experimentation and infrastructure building; because we know more now about what works; because we have general funds up and running; because we are better engaged with relevant sectors; and because we need to build confidence and momentum by delivering clear change.
We will focus our efforts, alongside partners bringing their capital and expertise, on social issues where we can have a sustainable impact – and in the process we will help build the social investment market. We will improve people’s lives, by helping tackle social challenges through investment.