Social investment is a large tent that is broadly defined
Third Sector Magazine, by Rodney Schwartz
I have met many organisations this year that have tried to convince me, at length, that their version of what is ‘social’ is correct.
The Baxi Partnership, for example, has a long-standing commitment to employee ownership, with deep experience in securing the social and financial benefits related to it. The John Lewis Partnership is the best example of a social firm. The Anthroposophical movement and its central tenets lie at the core of Triodos Bank, and inform its activity. The Co-op is committed to the concept of cooperative or custo-mer ownership, and an offshoot it helped to form, the Unity Trust Bank, has similar core principles, but with a historical tie to the union movement.
In the UK, a lead is now being taken by Big Society Capital which, as a recipient of £400m in unclaimed assets, has had to define what it can invest in – which partly requires defining what a social purpose business is. This definition is important, for it guides how BSC can invest its millions. Some want BSC’s remit to be broader, but the act that created it is clear, and some deeply social areas are not open to it.
The point is that there are many views on this, and though some have important consequences, I find it difficult to advocate one view over another – they all seem right to me.
It is in this spirit that I am bemused by the recent debate about social finance and investment kicked off by Robbie Davison’s thorough piece, "Does social finance understand social need?", on the website of his social enterprise, the Can Cook Studio. It has been followed up by responses from commentators such as Nick Temple and David Floyd, and by comments posted on our recent ClearlySo blog post "Social finance: the case for helping the least needy", by Davison, Isobel Spencer and Paul Halfpenny.
Lurking here is the presumption that any one of us can know what is precisely the point of social finance and investment. I think it would take more than a trace of arrogance to imagine that any of us is in a position to dictate a definition to the sector. Any attempt to do so will falter, because the meaning of ‘social’ is highly subjective. Devising a common definition will be challenging.
However, I believe there is also a practical risk if anyone tries to proscribe and thereby limit what is included. From our perspective at ClearlySo, the biggest problem for social investment is not the precision of the definition of the term, or its deviation from some ideal, but rather the small size of the market. Put simply, we need more investment in social everything.
Thus, we endeavour to bring in more investment from individuals or organisations with capital, however they choose to define ‘social’ (within the bounds of decency and legality, of course) and match them with appropriate investments. By defining the sector broadly, we help to create the largest possible market. I do not believe this will undermine the ethos of the market. On the contrary – once investors enter the ‘social investment tent’, they will be attracted by other forms of social investment and become more open to diversifying their impact investment portfolios. By assisting them onto the first rung of the ladder (even if we are talking about highly secure, asset-backed finance for a well-established social enterprise), we make it more likely that they ascend. Low-risk investments are the natural first step in a nascent market. I am confident that they will move up the ladder without destroying the market.