Social Investment – or the Emperor's New Clothes


From the point of view of the voluntary sector the hype surrounding social enterprise in recent years can look very like the emperor's new clothes – after all, charities through their trading subsidiaries, or directly through 'primary purpose' trading, have been earning income for social purposes for years.  Scottish social enterprise guru Laurence De Marco recently estimated that 90% of Scottisn social enterprise is still done by charities.

But if there's one area that can match social enterprise for hype, it is social investment.  Social investment is less passive than ethical or 'socially responsible' investment – which merely tries like Google to 'do no evil'.  Instead, social investment is about actively backing social outcomes.  The current flavour of the month is the social impact bond, which produces a financial return directly proportionate to social gains.  The casual observer might easily run away with the impression that such social investment is really happening – right here, right now.

It is in this context that the recent BCG / Young Foundation report, Lighting the Touchpaper, makes such sobering reading.  Because outside of community co-ops and local community share issues – which like the voluntary sector predate the hype - social investment doesn't really seem to be happening at all.

Total social investment in 2010/11 was £165m, of which only about 2% was equity (£ 3 or 4 million).Social Investment Pie Chart

The report places this in a number of contexts to communicate how incredibly small it is - for example total voluntary sector income of over £35 billion on assets of nearly £100 billion.

Of course the tiny seed of social investment is expected to grow.  The report includes a Foreword by Nick O'Donohoe, Chief Executive of Big Society Capital.  John Mulkerrin, who has made the CIC Association the largest and fastest growing social enterrise umbrella body in the UK now, and who drew my attention to the Young report, draws the conclusion that CIC shares need to be made more investible.

No doubt there are many lessons here.  Our movement has already been guilty of projecting a distorted impression of social enterprise as distinct from the voluntary sector on the one hand and ethical business on the other - wheras in fact it is these wings that have lifted social enterprise to it's present position.  The last thing we need is another case of the emperor's new clothes.

Civil Society E-News

Just seen that this Blog by Geof Cox was quoted in the March 2012 Civil Society E-News.

Social Investment

Geof,

The current Government is 'running out of steam' : actions speak louder than spin. It is clearly pushing through its agenda at an accelerated pace. With a view towards an election being forced sooner rather than later. In this environment, with emphasis on mass privatisation, social causes  such social enterprise are no longer a priority.

The demise of Great Britain was set after the Second World War, when the Banks looked to take U.K money and invest it in the U.S. Creating the precedent of short term gains for, for short term investment. That has continued and expanded to this day.

In this light, Social Enterprise has to realise that it is on it own. It will always be let down by Government (especially this one) and Banks, engaged in pusuing their own selfish interests. The first port of call is for Social Enterprise to work more closely  together : to inspire each other. Then find more innovative ways to generate their own capital, whilst increasing community involvement.

In my own sphere of work, I can see good opportunities for the next phase of internet development : Web 3. That will be based on peer-to-peer networking, whereby entrapreneurs can deal directly with each other. Effectively cutting out the centralised, middle-men' such as the Banks.