A group of leading experts in social investment from the UK have today set out their vision for the next stages of development of the social impact investment market in the UK. The report 'Building a social impact investment market: The UK experience' is part of the culmination of a year's work, following the launch of the Social Impact Investment Taskforce under the UK's presidency of the G8 in 2013.
Social impact investments are those that intentionally target specific societal and/or environmental objectives along with a financial return and measure the achievement of both. Although still relatively small, the social impact investment market in the UK is widely regarded as one of the most advanced globally.
The report is based on the work of the UK National Advisory Board, which held working group sessions, commissioned three separate working groups on priority issues and also commissioned an independent review.
As well as setting out a summary of key developments for other countries to learn from, the report calls for key initiatives in six areas to develop the market further:
- Improve the capacity of social organisations to appropriately use investment to scale their impact, specifically through the creation of a social impact and scaling fund and the expansion of the Investment and Contract Readiness Fund
- Promote a new culture of Government procurement that encourages innovation and prevention, specifically through launching a Government hub for prevention and innovation and creating a social prevention and innovation pilots fund
- Make it easier for businesses delivering social value to be recognised by launching a Social Economy Commission and establishing a Social Performance Certifier and golden shareholder model form
- Provide a combination of grants and investment to intermediaries, by establishing a blended capital facility
- Require all pension funds to offer a social investment pension option
- Encourage greater transparency around lending into deprived communities, particularly from large financial service institutions
Nick O'Donohoe, Chief Executive of Big Society Capital and Chair of the UK Advisory Board to the Social Investment Taskforce, said:
“The establishment of the Social Investment Taskforce last year under the UK's presidency of the G8 provided an exciting opportunity to draw on global expertise to do even more to connect socially motivated investors with charities and social enterprises tackling tough social problems. The recommendations published today set out a compelling vision to take this forward, and we hope that other countries will be able to learn from the UK's experience to-date.
However, in the UK there is much more that needs to be done to ensure that charities and social enterprises can access appropriate investment, and to enable more socially-minded investors to enter the market. We are committed to working with partners from across the social and finance sectors, as well as government, to help make a thriving and sustainable social investment market in the UK a reality.”
Daniela Barone Soares, Chief Executive of Impetus-PEF and Chair of the working group on Building the Capacity for Impact, said:
"Our paper highlights that there are two types of capacity-building required by the social sector – one is around building strong resilient organisations, with good governance, systems, controls and management. The other is around building organisations which can reliably and predictably produce meaningful social outcomes, eventually for large numbers of people. Both are crucial for the social investment market to flourish, but the latter has been largely neglected in attempts to develop the market. We recommend much more investment in, and support for, organisations to build these 'outcome-producing' capabilities - for the good of investors, investees, and for those who need 'outcomes' most of all, those in our most deprived communities."
Toby Eccles, Development Director of Social Finance and Chair of the working group on Recommendations on Procurement, said:
“If you were to design a model to keep innovation out of government, present procurement practices would be hard to beat. Major change is required if we are to move away from a one size fits all approach to services that fit the needs of the people using them rather than the needs of the system.
Drawing on lessons learnt by the IT industry and elsewhere, we recommend a completely different approach to government procurement which would have a profound impact and enable more prevention and more innovation in social services.”
James Perry, Chief Executive of Panaphur and Chair of the working group on The Social Business Frontier, said:
“The legal and regulatory environment for business and charity in the UK was established in an analogue age where profit and social good were conceived as separate. Certain sectors of business and charity have now moved into the digital age. Entrepreneurs, investors, charities and governments are collaborating and aligning to create profits with purpose – delivering measurable social value alongside financial value. New structures, such as Benefit Corporations, Social Impact Bonds and Community Interest Companies, are being conceived and adopted around the world, and offering the promise of a step-change in the ability of charities and businesses to create social value . The time has come for a strategic response in the legal and regulatory environment so as to support, rather than inhibit, these developments”.