Why Social Investment Is a Threat To Charity Values

Why Social Investment Is a Threat To Charity Values
Forbes Magazine, by Jake Hayman
In a world where charities are already pitted against each other by funders looking to procure impact, using tools of social investment over grants makes a lot of sense. In a world where we move beyond charity competition into a collaborative one, it becomes much less interesting.
There are three areas where social investment makes sense:


Firstly, if you see a charity paying extortionate amounts on your rent and a building comes up for sale at a bargain price, then providing finance so that they can buy the building and pay you back cheaper than a bank loan makes sense. Expanding charity shops or setting up commercial retail operations might come under this same category.


Secondly, if a charity is going to go bust for cash flow reasons because the government department it contracts with pays so slow, then a bridging loan may make more sense than a donation to help bail them out.


 And finally if there is an organisation doing nothing “new” but delivering a good service at a decent margin and wants to expand that service, then if you can make it cheaper and easier for them to access capital than a bank would, great. More eco-lodges, more distributors and retailers for solar lanterns, more good in the world and no harm done.


Each of these approaches help speed up growth, save cash or prevent failure. None of them help us learn anything, provide a platform for the most vulnerable or lead to the advancement of the sector. They are all very nice but the world with them looks pretty similar to the world without them.


There are three more areas, meanwhile, in which social investment is growing and is potentially very dangerous.


The first is in social innovation. There are increasing numbers of new approaches and ideas that are looking for equity or quasi-equity finances for new ways of delivering social or charitable services. The challenge with this is that in an instance where a social innovation is incredibly successful, the world is better off when that success and all the learnings connected to it, are socialised and made freely available to others. Where social innovation is protected by lawyers and shareholders then we run a risk that ideas do not spread as quickly to those who might benefit from them: we put organisational performance as a greater currency than social change. Do we really want to get to the point where one charity, social enterprise or NHS Trust is not running a particular programme or approach because they are worried about getting sued?


The second is in investing in outcomes payments. These are dangerous things that lead to the commoditising of people’s lives. If you can help 90% of the people for half the money then why wouldn’t you? Indeed it may well be that government should be rolling out that intervention for that group. But if you are privately commissioning the charity that was established to be the one entity on the planet that listened to and represented the rights of the last 10% – to ignore those people in exchange for growth and a successful “deal” – then you may well do more harm than good in the long run.


The third is when social investment is used as a distractive play-thing for charitable foundations that are harming the world. There is a growing list of foundations that have a social investment “pot” and see no irony in the fact that they use the majority of their endowment at any given time to make as much money as possible without a care for the harm they are doing in the world. Dinner party conversation is in danger of getting lost in chitter-chatter about small social investments when the over-arching approach to investment is anything but social.


The essential values of the social sector should be around openness, honesty and a commitment to providing platforms to those most in need, to help shape the support they need. Every penny of the money we deploy – grants, social investments and endowment funds – should work to fulfil those values. At present they rarely do. Social investments normally amount to no more than a “nice to have” and the danger of further mainstreaming them and of more donors asking to see an impact bond, a patent or path to trade surplus is a dangerous one.