Social Investment Commission Report Launch

John Kingston, Commission Chair

John is an early pioneer in social investment – and while there has been loads of growth and noise – we need to remember that it has to be about ‘a locality’. Social investment is a tool in the toolbox – not a panacea. It is a useful tool.

We started by trying to work out what the demand in local communities might be. What are the needs – particularly for finance – from local social enterprises and organisations with social objectives. Social investment needs to be a mechanism that meets local needs and supports the mission.

It’s about access to capital for charities and others – and while there’s large scale lending now – more difficult for local organisations to access smaller, simpler forms of social investment.

Social investment can help to tackle social problems – cites example of the first Social Impact Bond – helping to prevent re-offending by young people in Peterborough. These mechanisms enable organisations to work together with flexibility – draws analogy between dinghy sailing and a rail journey. Dinghy needs constant adjustment – trainjust goes. SIBs are an example of a locality coming together to tackle problems on an integrated basis.

The fundamental difference between a social investor and a grant-maker is that the former looks to build capacity in the organisation; the latter buys a solution. merit in people coming together in a ‘safe place’. Politicans want answers by Wednesday week – the problems tackled by social investment are often complex and the timescales can be 7-10-20 years. It’s an investment philosophy and it needs to be long term.

How do we avoid the report ‘staying on the shelf’? This is very important to us – we want to see action – and suggest 3 practical ways of using the new tools.

We look forward to debate and pushback!

Kieron Boyle – Cabinet Office

He heads up social investment at the Cabinet Office and was part of the conversations behind the report. Social investment is about helping social ventures achieve more impact. It is about in impact philosophy. Pioneers often philanthropists. There is though from a national perspective ‘a mountain to climb’. Social ventures a innovative (more than commercial ventures he says). But there are challenges in coming up with robust answers to spending challenges at the local level.

We need a national/local debate. How do we see common principles? We need leadership – to take the principles and make them into reality.

Discussion

John asks “Have we reflected reality?”

One Westminster CEO – we are a lot of grassroots organisations and we feel that sometimes these reports come from another world – how can we connect?

John – needs access to very simple social investment products. The Social Impact Bond is at the complex end of the problem. But we do have some examples of local charities providing services as part of a SIB. It has to be about accessing capital. We need to be able to pay for assets over extended periods – and we also need to open up access to income.

Q – Larger organisations often feel they can be responsible for and help smaller groups – but it’s difficult given the funding picture and also the lack of robust systems in smaller organisations – even managing a £4,000 needs systems.

Point from CEO of a local development trust. We need to recognise that often small organisations may be able to make big impact – but they don’t have scale and the system of ‘big is better’ commissioning acts against supporting local organisations. You’re preaching to the converted. The challenge needs to be to the people who have the money – and power to commission. They need to invest in social capital. We need to engender the debate – commissioning may not lead to the best outcomes.

Point from a SBus person – The uncomfortable thing about the report is paying back £18k when you’ve borrowed £10k and you’re funding revenue activity. Too risky.

John intervenes and agrees that – it might be ok for capital – but it’s risky for revenue. We mustn’t encourage people to take unnecessary risk – needs to be appropriate risk. A matter of judgement. Sometimes we need facilities available as a ‘safety net’. Social investment can provide such a safety net.

In the case of the SIB – we can see that working over 3-5 years based on a consortium approach, especially for smaller local charities. Need to be part of a combined integrated service. I agree with you and I am jumpy – which is why I’ve taken time to answer this question.

Q – do all the charities invested in have to be incorporated? This has been an issue. John says most organisations and social investors will invest in a ‘purpose’ rather than a corporate form. It’s about the social purpose.

Paul Doe – CEO of a Housing Group and St Mungos Broadway (which has a social impact bond). Do something you know really well. We take the risk though – the investors will not take any risk. You have to be very careful about what you get into. The legals etc took £50k. Positive – what about crowdfunding – this has not been mentioned and returns an be good. We need to invest where we live.

Kieron Boyle – need to be clear about who is helping social ventures get ‘investment ready’. From government’s perspective it’s often a challenge to move money towards preventive services. Also it’s a challenge to buy from small organisations. Cites the social value act as part of the process. Needs to be joining up of the national and local. Can we align local money with national commissioning to make it work. Agrees that crowd funding can work- but it seems to be skewed towards equity investment – this can be a challenge for some organisational forms.

John – needs a way of attracting local people to own and be part of the solution – and it may not be pure investment.

CEO – Westway Trust. The market has been developing – cites Good Deals Conference. But does the intermediate layer take out value rather than add it? There are some mid-sized organisations that need support and don’t really see it working well. be in a dialogue with organisations – especially mid-sized ones.

Kieron says that there are some intermediaries that are very good.

David Warner London Funders – an apposite time for this report. Funders and investors see the need for a range of products including grants at the local level. Need to invest to tackle problems over a longer term. Needs to be new ways of unlocking local giving and therefore local capital and social investment.

How the work can be taken forward

David – need to combine the Triborough approach more broadly with regional reality. Need something to glue the top-middle-bottom to make systems work. There are issues over capacity for CVS organisations – they’ve taken a battering. Agree that crowd funding is a really interesting opportunity – there are people with disposable wealth – and we need to engage them in local investment. There is a piece here about private investment from local businesses – can we get social investment from them?

There’s lots to do – need to be realistic about the scale of the task. Needs to be a local and a regional task – need to make sure we spread further than London possibly. “I’ll be e-mailing – need to form a task force”.