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Update from the field

29 Jun

As it now says in the About section of this blog, I’m focusing on my role at Social Investment Business, so this blog is paused, bordering on dormant. Hence no post since January.

I thought it might be useful to give a bit of an update on what we are doing over at Social Investment Business, though, and link to some recent articles from myself & the organisation as a whole. Hopefully of interest to loyal readers of this blog….

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Work Activity

We run a variety of programmes and funds dedicated to supporting charities and social enterprises to become more resilient. Check out the full list here.

I’m particularly excited about the Forward Enterprise Fund, a new investment fund focused on helping those who are coming out of offending and/or addiction. Get in touch if you know of organisations operating in that field looking for support & finance. The Reach Fund we manage for Access also continues to work well – providing grants for short, focused pieces of work to enable social investment deals to get over the line.

We are also providing the project management & secretariat for the implementation taskforce aiming to build a culture of social impact investment. This is focused on influencing mainstream finance, and you can find out more about that via the link. Right now, there is an open call for evidence on better (non-financial) reporting – it’s short, important and closing imminently >> click here to submit info.

Finally, we have entered a new strategic partnership with Social Tech Trust, formerly Nominet Trust. Early stages, but I’m excited about what we can achieve together in digital / tech for good.

Writing & Reports

We’ve released two recent reports; the first a few months back is a hugely important, in-depth look at our work on business support and readiness programmes over the last 5 years and more. It dives into what we have learned and makes a clear set of recommendations for what we (and the wider sector) should do in future. If you work in the social sector, a read is highly recommended >> Strength in Numbers

The second, much shorter report we released this week, which takes a look at recovery, restructures and mergers in the social sector (and what finance & support could help more organisations). We commissioned external experts Eastside Primetimers to write it, and I think it’s a valuable contribution to the thinking on this topic >> Match Points

Other recent blog posts that might be of interest include:

>> The time is now for social value from our chair Hazel Blears (written before the recent government announcements on this topic)

>> Keeping your friends close and your customers closer by me, on putting customers at the heart of our work

>> Our gender pay gap by our head of People, Shelby Bradley

>> Is social investment perpetuating or challenging inequality?by Owen Dowsett from the Centre for Social Justice Innovation at Dartington

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Hope all that’s of interest – a final note: we are recruiting two newly-created senior roles, so do spread the word and share the link: Director roles. It’s an exciting, busy and (hopefully) impact-ful time to be involved.

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The First £1.5 billion – and what it tells us

10 Apr

Gritty with quote_1As one (tough) financial year passes, and another (as tough) begins, it feels like a useful time to delve into the sector’s finances more broadly. More specifically, to take a look at Big Society Capital’s report on the Size and Composition of Social Investment in the UK, released a couple of weeks back. (NB – the report was Matt Robinson’s swansong at BSC, as he leaves for international development pastures – he’ll be missed as a clear, reasoned, and principled voice).

The headlines are impressive: £1.5bn worth of social investment (that’s the total value at the end of 2015, not deals done in the past year). Dealflow in the year c. £430m (which is up from the £200m figure reported two or three years back) demonstrating 20% growth or thereabouts. And some evidence of a shift from secured lending to more unsecured lending and different types of products.

[in passing, it is worth mentioning that I enjoyed the “We are confident to a reasonable degree of accuracy (+/- £tens of millions)”, which rather illustrates that the data is still not great. Oh for that margin of error….]

There is much else of interest in the report, not least the fact that this total is dwarfed by about £9bn in bonds and bank loans to charities and social enterprises, not to mention a further £59bn or so if housing associations are taken into account. An alternative version of the report could be titled “Social investment: putting it in perspective”, as some have argued for some time. Nevertheless, there are some signs of progress, and they should be welcomed.

I liked the definitional / segmentation approach too, as best demonstrated by these two diagrams:

BSC Segmentation 1 BSC Segmentation 2

This approach to thinking more clearly about social investment and the terms we use (impact investment, ethical investment, positive investment) is a useful contribution; it also came up recently at the release of some new analysis of social investment research by Jess Daggers and Alex Nicholls – also well worth a look – as well as in the Alternative Commission report. This segmentation of what we mean when we talk about different things seems increasingly important to me where social investment is concerned: so much of the heat and light and baby-bathwater debate flows from misunderstandings, often between (potential) investors and investees.

The percentages table on page 9 is where it gets very interesting: this is a breakdown of social investments by proportion / type. Here it is:

BSC Table 1

[The categorisation on the left relates to BSC’s strategy (Social Innovation, Participation, Scale etc). ]

So to draw out a few things here:

  • there does seem to be a bit more unsecured lending going on: this is good news from a social enterprise perspective, as we know this is what a lot of organisations want/need – although we don’t know how much of the 47% lending figure relates to property; when one adds this to 9% in ‘high impact social property’ and whatever might be in the 30% to ‘non-asset locked’, then the figure could still be quite high. Indeed, if one takes the 30% not going to charities and CICs out of the equation (called Profit with Purpose here), even a cautious estimate like the Social bank lending + the high impact social property give you 45% / 70% which would be equivalent to around 65% secured lending. Not the 80% / 90% figures we used to see, but still a significant majority
  • Social Impact Bonds are responsible for 1% of all social investment in the UK. 1%. Even though the report mentions that this could have been double if calculated mid-way through 2015, that would have only taken it (by my maths) to, er, 2%. If data beats opinion, as someone wiser than me once said, then let us hope that due notice is given to this figure – community shares are responsible for 6 times as much; charity bonds 6 times as much (from the same number of investments), unsecured lending 10 times as much etc.
  • Social Investment Tax Relief-related investments are small but there’s been some decent progress in year 1; it will be interesting to see if they can grow as fast as Community Shares, and add to the ‘democratisation’ and ‘retailisation’ of social investment: 353 investments in total for community shares, involving thousands of people.
  • it’s a bit unclear what’s in the 30% at the bottom; in the annex it says this largely includes work by ClearlySo, Triodos (eg. loans to co-operatives), work by Mustard Seed and more – estimated at £462m through 807 investments, £118m dealflow in 2015 through 46 deals. Would be interesting for someone to disaggregate this a bit more, see if there is overlap with some of the sections above and what extent is just companies limited by share and what is social enterprises or co-operatives with pre-CIC or non-ben-com structures etc

I’m sure that the data isn’t perfect, and I’m sure Matt knows that too – indeed, he has some excellent recommendations on how to continue to get better with the data and reporting. More transparent reporting like this will also help eliminate duplicates (eg. with co-investees arranged by a broker) more comprehensively, and also create benchmarks that can allow for better understanding of progress. I’ve learned whilst being in charge of the State of Social Enterprise survey, that improving the data and the questions is an incremental process and one which is best improved by openness (see our report for Access, Prospecting the Future, for example).

So what are the take-aways?
– welcome the evidence of progress, especially with riskier, unsecured lending
– segmentation, segmentation, segmentation
– let’s use data to inform our policies, programmes and practice- let’s be as open about that data as possible (esp. its quality and how to improve it)
– let’s keep this stuff in perspective