Tag Archives: Big Society Capital

Starting New Markets: What Counts as Success and the Possible Sale of Big Society Capital

In mid-April, it was announced that Australia’s Macquarie Bank had acquired the Green Investment Bank (GIB) in the UK for £2.3 billion.  The GIB was launched in the UK, under the Conservative-Liberal Democrat coalition in 2012, to facilitate a marketplace for renewable energy investment in the UK. It was an initiative designed to fill a state funding gap for tackling climate change by attracting private funds to finance investments related to environmental protection and improvement.

Following the announcement, there was some concern in the marketplace that the new owner would asset-strip the GIB and that their intentions were far from the more noble aspirations of the Coalition Government.  Historically Macquarie has not been noted for its green credentials.  Only time will tell.

The UK has an honourable history in developing government-backed initiatives to kick-start markets considered important for a variety of reasons.  The listed venture capital firm, 3i, was originally started as the Industrial and Commercial Finance Corporation (ICFC) in 1945 to provide badly needed long-term funding in the post-war environment.  The concept was to foster the development of a market for entrepreneurial businesses in the UK and it became the first, and, for many years, the dominant VC firm in the UK market.  Its original stakes were owned by the major UK banks as well as the Bank of England and after a merger and several re-branding exercises, it floated in 1994.  After the business was listed all the banks gradually sold off their stakes.

The Commonwealth (formerly Colonial) Development Corporation (now CDC) was also begun by government initiative.  It was founded in 1948 by the Atlee Government with the mission of fostering business development in the former British Empire, starting with agriculture.  It has gone through many iterations, re-brandings and restructurings over the years, but like 3i and the GIB, it has a core mission which is not, and was not meant to be, solely about profit maximisation.

Big Society Capital (BSC) was another in a series of such UK initiatives.  Commencing in 2012, it was funded by the commercial banks (£200m), and received an initial allocation of £400m from unclaimed assets in the “dormant accounts” of UK banks.  It may invest the £600m subject to certain criteria, but I would argue its overriding mission is to build the impact investment market in the UK, which governments of all stripes have considered to be in the best interests of the UK.  In my view* it has been the most significant development in the UK impact investment market.

Some time ago, in a public meeting, I asked the then new Minister for Civil Society, Rob Wilson MP, if he expected to consider BSC becoming wholly privately-owned given that the GIB was in the process of being sold off, and also whether the new May administration was less committed to impact investment.  His reply was not altogether clear, but observers should note that there is form for UK governments to get excited about some new concept or initiative, establish a vehicle to finance it, support it and then sell it.  This is all part of impact investing (and early stage investing, and renewables investing and investing in developing markets) becoming part of the mainstream—a trend which all of us at ClearlySo strongly support.

To me, it’s not a development to moan about or feel sad about, but part of a process of moving markets onward, in a way that benefits society.  Were BSC to become wholly privately-owned (and I have no reason to think this is imminent or even planned) it would be an event which would mark a new stage in impact becoming closer to the mainstream—a next step in an unfolding process.

And just as a footnote, it is interesting that BSC’s first CEO has just been appointed CEO of CDC!

 

*In the interest of transparency, please note that BSC has an equity investment in ClearlySo of circa 9% and also has some £600k+ of debt outstanding to the company.

This article was first published on Third Sector.