There are deep tensions within the UK social investment community on issues such as profit and impact, finds a new report calling for a debate on the key problems.
The report, Shining Armour or Sheep’s Clothing Views on social investment in the UK, is written by Clore Social Leadership Programme fellow and director of charity NewStreet, Mary Duffy and is based on conversations with the UK social investment community over eight months. It focuses on the social investment community in Scotland, although it looks at the issue in the UK as a whole too.
It finds a there is a host of tensions within the social investment community on issues such as profit, impact and type of finance available.
The report warns that some believe the case for social investment is overstated and that some organisations are being encouraged down risky routes they do not need to take.
Further, there is opposition to the focus on loans in social investment. Big Society Capital, currently the country’s biggest social investor, is financing organisations on a return basis. However, some warn the focus on loans has limited the development of other types of financing packages necessary for a sector dominated by SMEs.
The report also notes that there is “some uneasiness” about the idea of profit distribution in social impact work with concerns about a clash of values, unequal power and negative impact on the voluntary sector. The report also highlights suspicions around social investment intermediaries with negative stereotypes about their motivations.
Market-based framework is flawed
Scaling-up is seen as a key mechanism for many in the social investment community to achieve deep social impact, but the report finds that many feel this rhetoric is damaging the voluntary and social enterprise sector:
“Critics argue that many social organisations started as a response to market failure and that trying to set them back into a market-based framework is flawed,” says the report. “They say the scaling agenda is driven primarily by those concerned with building a bigger social investment marketplace rather than concerned with impact.”
There is also “considerable reticence” about social impact bonds, with the report saying they are seen by some as complex, unproven and unlikely to make a major contribution to growing the social investment market overall.
The report also notes other oft-voiced concerns such as a lack of investment-readiness, insufficient understanding of the social investment space and reduction in grant funding.
The report concludes that while expectations remain high around social investment in the UK, as along as concerns lie unaddressed the chance to improve social impact will be less.
Debate needed
Duffy advises that two issues are central to the debate: unpicking the criticisms of resistant voices to social investment presenting views more in terms of protecting the sector than in relation to improving the spread and quality of social outcomes.
And how much people object in principle to the idea of investing in social impact work or whether their concern is more about who is investing and possibly getting a return. “The stereotypical ‘rich guy’ looking for a return is too easily portrayed as self serving,” she writes. “Whilst community members providing small amounts of money for something with a view to later repayment provide a more palatable pictures. However the initial investment principle – an
expectation of a return – is the same.”
Focusing specifically on Scotland, Duffy says there is a sense of cultural identity deeply uncomfortable with ideas of profit-distribution applied to social impact work.
She recommends a debate in Scotland on the cultural fit of social investment, more clarity from the Scottish government about its vision for social investment and more partnerships between grantmaking organisations and social investors.
