Nesta director: Social investment ‘too focused’ on social impact bonds

Nesta director: Social investment ‘too focused’ on social impact bonds
Civil Society, by Vibeka Mair
Joe Ludlow, Nesta’s director of social ventures, has said there is a dangerous trend of social investment discussions focusing on social impact bonds alone, even though there is currently only one live example in the UK.

Ludlow aired his concerns in a blog on Nesta’s website. Speaking to, Ludlow said the only live example of a social impact bond, a trial in Peterborough which is aiming to reduce re-offending, is worth £6m in value, while the whole social investment market in the UK is worth around £180m, according to recent research from Boston Consulting and the Young Foundation.

“There has been a lot of attention on social impact bonds,” he said, “when there is a much wider, diverse and more mature social investment market. Some are stuck on the idea that social investment only means social impact bonds. This denies other work done in the social investment field by Venturesome for example, or Big Issue Invest, such as secured or unsecured loans for social enterprises to purchase or rent property.”

Ludlow, however, did say that social impact bonds were an “exciting innovation” that deserved attention: “It has to be welcomed that the government wants to think about how to better procure better outcomes in public services,” he said.
Think tank New Philanthropy Capital raised similar concerns to Ludlow in a recent report on social investment. The report, Best to Borrow, warns that social investment is a new idea to many people and as it has grown, various misconceptions have arisen, including that social impact bonds are the only type of social investment.

Katrina Cruz, a marketing and development intern at ClearySo, a network aiming to grow social economy, has also suggested in a blog this week that the social investment discussion needs to be expanded.

The blog, which provides a sypnosis of a recent conference on social impact bonds hosted by the Social Market Foundation, says concerns were voiced about the value of social impact bonds.

Speaking at the conference, Matt Robinson, head of social investment at the Cabinet Office, said: "There is a sense that the market (in which the fog is only really just beginning to lift) still has some way to go to prove its feasibility."

Cruz concludes her blog by saying: "For all the hype surrounding social impact bonds, the road to success still seems to be strewn in potholes… Thoughts are being murmured, albeit hesitantly, that the time is coming when we’ll be better served looking beyond social impact bonds at other examples of social investment intermediaries which are demonstrating better success."

A number of social impact bonds are in the pipeline for 2012. The Office for Civil Society is working with four local authorities to design social impact bonds to help ‘problem’ families.

Further, Big Society Capital’s chief executive Nick O’Donohoe has said it is likely that it will be a cornerstone investor in all social impact bonds over the next six to 12 months.

But he has also warned that unless someone develops a risk structure around social impact bonds, the appetite for investment may only be limited to foundations.