Social Investment: A Question of No Return?

This is a guest blog entry from Kate Markey, Managing Director of CAN Invest who are sponsoring the Sustainable Funding Conference where Kate will be delivering a Bitesized Lecture. CAN Invest are also providing the prize for the Crowdfunding Challenge. If you’d like to find out more about their work with investment readiness, come along to the conference (there are only a few places left) or visit CAN Invest’s website.

A few weeks ago I met with a board of trustees of a social enterprise to provide them with an overview of the emerging social investment landscape. They were a diverse, capable, experienced and committed board, driven by the mission of a social enterprise that has profoundly positive impact on its community.

Mid-discussion on the launch of Big Society Capital and its work to grow the Social Finance Intermediary Market (SIFI), one of the trustees sat back and forlornly reflected: “Returns, interest rates and risk? What do these things have to do with social enterprise? We are about creating social good not generating returns for investors …”

His despondent reaction has stayed with me for a number of reasons, not least because of his evident dedication and experience as a board member. As support organisation for social enterprise since 1998 (CAN is a co-founder of both Social Enterprise UK and UnLtd), we have long called for greater access to appropriate finance for social ventures, one that recognises both the social impact and commercial differences of the business model. So the launch of Big Society Capital earlier this year felt like a new dawning. Not a rose-tinted, blindly optimistic and self-interested kind of new dawning, but a real one. And not because it offers CAN and other SIFIs the chance to access funds, but critically because of the opportunity it gives social ventures to change lives and create jobs in the heart of our communities.

It’s good to see Big Society Capital on its current ‘roadshow’, touring the country to promote social investment. The new institution has much to do to articulate its position, its ambition and promote its role to and for the sector. But importantly organisations like CAN have an equal responsibility, as the comments from the trustee clearly show. We are (literally) the intermediaries responsible for bridging the divide in language, culture and (sometimes) values that can exist between the financiers and the social ventures on the ground. We must sign-post social ventures between and to the support that is most appropriate to their scale, mission and ambitions. We have a duty to encourage management teams and boards to see that with the risk of debt also comes financial independence and, what I often refer to as, mission liberation.

In short, we must ensure that we help develop a social investment intermediary market that is built and driven on quality and choice at every stage of the social business cycle.

It’s interesting to hear how social ventures and support organisations in London and the South East have so quickly adopted the terminology driven by the emerging social investment market. We are inevitably closer to all the excitement. Yet in the rush to see the fruition of our long campaigning for new forms of finance, how often do we look back to ensure that the very organisations that could benefit from this new dawn, are on the journey with us?

As the social investment sector changes, it will and should attract new leaders and boards with greater diversity of skills and appetite for risk in return for scaling mission. Without them, we’ll struggle to attract new investors into the market.

But what of those capable, experienced and committed trustees like the ones I met?  We cannot lose sight of those social organisations that, by delivering services and support, have built the kind of trust, accountability and reach into communities that other companies (and their brand consultants) can only dream of.

As an Approved Provider on the Investment and Contract-Readiness Fund, we are committed to helping social ventures and their boards on that journey towards investment. It’s a journey we know only too well. In 2006, CAN was less than 50% trading and our destiny was all too often controlled by the grants we secured, some totally core mission, others less so. By 2012, over 98% of our income is earned revenue and we have raised over £22m in finance to support our own growth and that of the social ventures we support. That journey has seen changes to the board, the management team, our culture and team performance. This space is not for everyone and there will be more trustees questioning this new dawn. But the opportunity to sustain and scale our impact is here. A question of no return perhaps, but the social return is definitely worth the risk.