Commission on Unclaimed Assets issues blueprint for social investment bank
The Commission on Unclaimed Assets today issued a detailed blueprint for employing the unclaimed capital released from dormant bank accounts to create a new financial institution to step up the fight against poverty and social exclusion.
The Commission’s first priority though is to re-unite people with their cash, a right that they will retain whenever they come forward to it. The Commission’s work regarding consumer protection and the regulation of dormant accounts will be published at the end of March in a separate document developed in conjunction with the National Consumer Council, entitled “Consumer protection and the regulatory framework for dormant accounts”.
The SIB will use the available, unclaimed capital to affect a dramatic increase in investment and professional support for third sector organisations, including charities, community groups and other independent bodies with a social purpose, many of which are in desperate need of capital.
The Commission’s report today concludes that the creation of a Social Investment Bank could lead to the emergence of a thriving social investment market capable of fostering the inclusion of marginalised communities in the mainstream economy while enhancing skills and financial management across the charitable and voluntary sectors. Crucially, the SIB would also increase overall investment in economically deprived areas by providing:
• An independent institution fostering financial innovation and creating a social investment market to step up the fight against deprivation and exclusion in the UK.
• An increased scale and range of finance through existing and new intermediaries providing finance to the third sector.
• Improved access to private capital and the capital markets.
The Commission’s Chairman, Sir Ronald Cohen, commented:
“The third sector has a vital role to play in combatting disadvantage and creating a more cohesive society in the UK. Yet its ability to do so is limited by chronic financial insecurity.
A unique opportunity exists to create a new Social Investment Bank to act as a bridge between the social and financial communities, able to leverage its resources with money from private sources and the capital markets, and put them to work in our marginalised communities. Ultimately, the Social Investment Bank could make a fundamental difference in the fight to make ours a more cohesive society.”
The CUA’s key findings and conclusions are:
1) If the third sector is to continue to grow and meet its goal of supporting marginalised communities in a way that neither the state nor the private sector can, it urgently needs greater investment and professional support. Suitable capital should be available for organisations at all stages of development, from charities without trading revenue all the way to social enterprises that reinvest some or all of their profits in their mission and commercial businesses with a social purpose.
2) An independent Social Investment Bank should be created using the capital from dormant accounts to develop the social investment market on a scale that can support the UK’s vibrant and diverse but under-capitalised third sector, including social enterprise, community development and voluntary organisations. To be effective and able to operate credibly in capital markets, the Social Investment Bank will need founding capital of at least £250 million, with an annual income stream of £20 million for a minimum of four years.
3) The Social Investment Bank should be small, adaptable, innovative, and able to take risks. It should bring together the best of the financial and social sectors. It should act as a “wholesaler of capital” working through existing and new financial intermediaries, assisting their development and encouraging their growth.
4) The Social Investment Bank would undertake four initial activities:
a. Capitalise existing financial intermediaries and fill gaps in the marketplace where lack of capital is restricting social impact;
b. Develop the provision of advice, support and higher -risk investment so as to accelerate the growth of demand for repayable finance;
c. Develop programmes of sustained investment in specific markets such as community regeneration and financial inclusion;
d. Support existing and new intermediaries in their efforts to raise private capital. These activities should attract significant additional finance into the sector.
5) The most effective way of providing significant capital to the third sector is by facilitating access to private finance as well as to the broader capital markets. Since financial returns are likely to be below mainstream rates of return, we recommend that tax incentives should be used more broadly to encourage the flow of capital into social investment. Community Investment Tax Relief (CITR) should be significantly extended.
6) The Social Investment Bank should be an independent institution answerable to the third sector, with a governance framework that is effective, representative and compliant with best practice.
Source: Commission on Unclaimed Assets