Is the government downgrading impact investment?

On face value, the decision to move the Office for Civil Society from the Cabinet Office and into the Department for Culture, Media and Sport is a bit puzzling. Which bit includes us? Are we part of culture, media, or sport? It is hard to say but, in this regard, government is similar to the corporate sector. Things and people have to report to somebody, somewhere and cannot expect what they do to be in the title of the division. Secondly, Karen Bradley, the new Culture Secretary, might turn out to be terrific. At this point, one simply has no way to judge.

From what I have read, the charity and social enterprise sectors are in uproar. about the move. I suppose some of the consternation stems from the fact that we were very much the darling of government, and now feel, well, a bit jilted. Three successive governments (Labour, the coalition and the Conservatives under David Cameron) devoted a great deal of attention to the third sector and impact investment.

For Cameron, this was one of the centrepieces of his big society programme and seen as a critical path in delivering positive social outcomes in fiscally constrained times. Our sector has been subsequently subsidised, championed and the subject of unrelenting ministerial love. This was capped off in making our area a centrepiece of the recent G8 summit in London a few years ago. The global social impact investment task force sprung out of this and its work continues.

But this highlights the risk of too close an alignment to any political party or individual. When they are replaced, as is inevitable, the factors that brought the sector into favour will work in reverse. What is clear is that the new Prime Minister, Theresa May, is establishing her own legacy and those programmes that are seen as ideologically close to her predecessor might be in jeopardy.

What many fear is that the largesse that has been lavished upon the sector will cease. I do not speak here of the charitable sector, which is potentially facing a serious crisis and in which I have very limited expertise, but the impact investment sector.

For the impact investment sector, I have some reservations, which I have expressed publicly, about the extent of subsidy we receive and its distortive implications. In a number of programmes, I observed it driving behaviour and not facilitating it — an important difference. I have also been a long-standing critic of tax credits for impact investment, believing them inappropriate at a time of severe fiscal constraint, especially as they predominantly benefit the wealthy.

I do, however, see a silver lining for the sector; one which stems from my deep-seated belief that impact investment and the values-driven enterprises it supports stand on their own merits. High-impact enterprises can benefit from lower cost of labour and capital, higher prices for their products and high visibility. They generate substantial positive externalities which governments, one way or the other, are going to need to pay for, and increasingly will pay for as commissioning shifts to outcomes-based systems. Investors, corporations, and consumers value the positive impacts these enterprises generate and this is increasingly being incorporated into their investment and purchasing decisions. Maybe now impact investment and social innovation will flourish, not as a pampered child but as a great idea whose time has come.

First published in Third Sector on Tuesday 23rd August 2016.

Russia, Rio 2016 and the Danger of Exclusion

The Olympics officially open today in Rio de Janiero.  Whilst political and economic turmoil in Brazil and the outbreak of the Zika virus have overshadowed and at times even threatened these games, the first ever in Latin America, a more recent cloud has been the Russian athletes and the reactions of various authorities to apparently proven allegations of state-sponsored doping.  In the UK, many have clamoured for the banning of the entire Russian team, as a means of “getting tough”, “cracking down” and in varying terms, acting in a way which will discourage others.  Banning is the ultimate sanction we use in such circumstances – short of violence.

When I had the privilege of attending the Lisbon meeting of the Global Social Impact Investment Steering Group (GSG) a few weeks ago, I was reminded of the meeting I also attended of the G8 Social Investment Task Force Plenary (G8 SITF) in London in July 2015.  On both occasions I found myself asking, “Where is Russia?”  As they are a member of the G8, I was always bemused by the fact that somehow Russia was out and Australia was in.  Nothing against Australia, mind you, but the G8 is the G8!  Now I have no idea why Russia was not there – asked a few people who seemed not to know.  It is quite possible they were invited and did not attend of their own accord.

What was impressive was that many new countries were involved in the 2016 meeting in Lisbon – Mexico, Portugal (the host), Israel, Portugal and India.  The world of impact investment, and in general, is enriched by the inclusion of many differing voices, and these five added a great deal to the meeting.  Russia’s absence disturbed me, whatever the explanation.  A world where pariah states come to exist, even if their behaviour brings it on themselves, is less appealing to me than one in which all countries continue to meet and we endeavour to improve behaviour through engagement.

Another absence from the two meetings was any country with a predominantly Muslim population.  I myself would have particularly welcomed hearing an insight into how such countries are approaching impact investment.  In particular, I would be keen to see how Sharia Law impacts on the funding and enterprise models.  Again, I do not know how many were invited to join and what efforts were undertaken in this direction.  But, in a world where western anti-Muslim feelings are increasing, in part as a reaction to atrocities linked to those claiming religious inspiration, I feel it is important to work doubly hard to engage.  A positive force, such as impact investment, could become a key bridge between communities, acting in a useful way to counter-balance the forces of exclusion, anger and hostility.

This is why I am delighted that 70% of Russian athletes (over 270 according to the BBC) have been allowed to compete in the Brazil Olympics, despite state-sponsored doping.  It might even be the case that some crooked athletes compete and win.  But against that, it also means that innocent Russian athletes are not penalised so the “international community” can make a point at their expense.  And overriding all of this is my strong desire to act against what I see as global entropy – where all around the world nations seem to be pulling apart, vigorously acting against each other in pursuit of their narrow interests.  Having a first Latin American Olympics is, by contrast, a positive act against entropy – by bringing a unifying global event to a new stage.

I think that impact investment can and must play a role in counteracting this worrying trend.  As the leading forum in the global movement I am hopeful that the GSG moves to engage, broaden and further diversify its membership base.  The stakes are high.