Who benefits from Big Society Capital?
The Guardian, by Daniela Barone Soares
Targeting BSC money at ‘intermediaries’, rather than individual social enterprises, will increase its leverage
The Impetus Trust’s Daniela Barone Soares thinks that targeting capital at ‘intermediaries’ is a smart move. Photograph: Impetus Trust
Do you qualify for some Big Society Capital? As soon as the announcement was made that the Government had committed £600m through this new scheme, commentators galore took to the internet to enquire as to which social enterprises would benefit. Very few people got to the nub of the matter: that the fund isn’t for charities or social enterprises at all, but for ‘intermediaries’: organisations that fund them.
It may sound convoluted, but as a member of Big Society Capital’s advisory board, I argue that there are good reasons for doing this. The most obvious is leverage: that organisations that fund other organisations help them become more efficient, last longer, help more people and ultimately survivefinancially.
True, there are few such organisations about: the space is new. One such is my own, Impetus Trust, the first venture philanthropy organisation in the UK. We were founded just ten years ago.
But even we do not qualify for Big Society Capital. In order for intermediaries to qualify, they have to invest in charities and social enterprises in such a way so as to create financial returns.
Big Society Capital is looking, not only to get money back for their investors, but to create profits of around 5%. The reasoning is that if you offer profits, more private investors will show their interest in intermediaries that serve social organisations and the people who are benefited thereby will prosper as a result.
By this process we arrive at the ultimate aim of Big Society Capital, but we must acknowledge that in today’s environment, even this feat of financial engineering represents a big ask.
A big problem is lack of qualified social organisations to benefit from such a scheme, i.e. the lack of demand for it. There are few intermediaries whose investments in social enterprises yield more than 5% profit. Many more yield a lot less. Many are like Impetus, who do not make any profits at all, but who engage for the purpose of social good alone. The pressing, practical question is: do intermediaries exist whose investments in social enterprises and charities yield enough profit that might enable £600m of Big Society Capital to be spread in some sort of equitable way? So that, in addition to satisfying financial returns, Big Society Capital can help genuinely tackle some of the most pressing problems in our society?
It is not only we who are currently talking about this idea of a nationwide lack of demand, or, ‘investment readiness’ within the charity and social enterprise sector. The Young Foundation and the Big Lottery Fund have been investigating, albeit lightly, these issues. At Impetus, we are putting together quantitative data on the demand gap. Many intermediaries, even the most profitable ones (indeed especially them) attest to the claims of we who work within the sector that ‘investment readiness’ – finding enough organisations to yield social investments – is their number one problem – and Big Society Capital’s biggest potential barrier.
How is this to be tackled? The Minister for Civil Society announced earlier this year that he would make around £16m available to enable organisations to become ‘investment ready.’ It is positive that he recognises that there is an issue here, but it is also fair to say that this pot may ultimately only scratch the surface of a deeper problem. It is doubtful whether a government splurge, even if it were possible, would solve it. But if not the state, then what?
As these questions linger, the truth of the matter that it is better to think of Big Society Capital as a long-term ambition rather than a short term programme. To fulfil this ambition, we first need better data on how many organisations could become investment-ready, what sort of resources they need to improve their capabilities and which intermediaries might help them. We also need patience: this is not a quick fix – investment readiness takes time. If we are to create the sort of private investment that the purveyors of Big Society Capital promise – as capital as concerned with social as it is with financial returns – we need to be prepared to wait. £600m is available to social enterprises and charities, but the benefits may take years to be felt by the rest of us.
And so Big Society Capital is something truly novel: an initiative that caused a stir online, and that (if it resists the pressures to ‘spend the money fast’) also looks some way beyond the current electoral cycle.