This year, I have met many organisations who have taken the liberty to convince me, at length, on their version of what is “social”. Baxi Partnership has a longstanding commitment to employee ownership, with deep experience in securing the social and financial benefits related thereto. The John Lewis Partnership is the best example of such a firm. The Anthroposophical movement and its central tenets lie at the core of Triodos Bank, and inform their activity. The Coop is committed to the concept of cooperative or customer ownership, and an offshoot it helped to form, Unity Trust Bank, has similar core principles, but with an historical tie to the union movement.
In the UK, a lead is now being taken by Big Society Capital (BSC) which, as a recipient of £400 million 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, as it guides how BSC may invest its millions. Yet some BSC professionals have expressed the view that they wish their remit was broader and included certain precluded areas. But the Act of Parliament which created it is clear, and some deeply social areas are not permissible.
The point is that there are many views on this, and though some have important practical consequences, I find it very 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?”). It has been followed up by responses from thoughtful commentators such as Nick Temple and David Floyd, and by comments posted on our recent ClearlySo blog post entitled, “Social Finance: The Case for Helping the Least Needy”, by Robbie Davison, Isobel Spencer and Paul Halfpenny.
Lurking here is the presumption than any one of us can “know” what precisely the point of social finance and investment is. 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, as the meaning of “social” (finance, enterprise or investment) is highly subjective. Devising a common definition will be challenging.
However, I believe there is also a practical risk for anyone to try to proscribe and thereby limit what is included. From our perspective at ClearlySo, the biggest problem for social investment is not the precision of how we define 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, I believe that once investors enter the “social investment tent” they will be attracted by other forms of social investment and more open to diversifying their impact investment portfolios. By assisting them onto the first rung of the ladder (even if it is highly secure, asset-backed finance for a well-established social enterprise) we make it more likely they ascend. Low-risk investments are the natural first step in a nascent market. I am confident that, in time, they will move up the ladder and not destroy the market.
First Published in Third Sector in March 2013.