The past few months have been busy at ClearlySo as we have had the best quarter in our history, closing 15 deals worth over £23 million. We thank our clients, pat ourselves on the back, and brag to our board and our shareholders as well as a number of friends in the marketplace.
In this way I guess we are not that different from other intermediaries. We talk about deal size, target IRRs, transactional complexities, the nature of the investors and the investees. Sadly, we speak too infrequently about impact. This is despite the fact that we are part of the impact investment market.
One investment transaction which brought this home for me was one involving Framework Housing, a housing association based in Nottingham which targets the homeless. As with many of the investment transactions closed this year, this £5.75 million transaction had its complexities. But it was not the rates of return or the asset-backed nature of the vehicle which I will remember— it was a presentation given by one of their beneficiaries a couple of years ago.
We were asked by Coutts Bank to bring four impact investment opportunities to their High Net Worth clients in Nottingham for an evening of investment pitches, drinks and canapés. Although all the presentations were strong, that of Framework Housing definitely stood out. Chris Senior, who managed the transaction for Framework, gave a brief outline of what they were planning to do and then quickly sat down and introduced one of their tenants— I shall call him “Jimmy”.
Jimmy read from a prepared script about his experience as a homeless person. While his hands shook he told of his life before he came into contact with the people at Framework and how, through their attentions, his life had been transformed. For anybody in the audience, there could not have been a more powerful way to understand the true nature of what Framework does for its clients. It saves and transforms lives. When I came back to the office I related the story to colleagues. We agreed that, almost irrespective of whatever else we did, if we were able to succeed in helping Framework, the year will have been worthwhile.
Many organisations do an excellent job of estimating and reporting on the impact they generate. For intermediary organisations like ClearlySo there is less opportunity to directly engender impact. The social impact facilitated is via the charities and enterprises we help. Thus there is a tendency to capture the essence of the impact generated by talking about the deals done and money raised. The assumption is that there is some correlation between the impact investment secured and the positive social value generated. This may be the case and I believe it is the case, but there is a risk in breaking the connection between capital raised and impact generated.
Financial intermediation in the mainstream economy also began with noble ends. Banks raised funds for entrepreneurial organisations which endeavoured to build great companies. When it worked, the social value was measured in the jobs created and the prosperity achieved. As time went on, the purpose of enterprise became increasingly disconnected from the sums raised, and the sums raised became the purpose in and of themselves. Some of this purposeless and pointless financial market activity contributed to the crash of 2008. If we are to avoid this in the impact investment sector we must remain vigilantly attentive to strengthening and reinforcing the links between financial inputs and impact outputs. Otherwise we miss the point of what we do and why we are doing it.
First Published in Third Sector in December 2015.