A coalition, including NCVO and Big Society Capital, has urged the European Commission to follow the lead of the US Obama Administration, and relax restrictions on individual investment into social investment funds to encourage engagement from the public.
The coalition, called the UK Social Business Initiative Working Group, makes the recommendations in its response to the European Commission’s (EC) new consultation on promoting and developing financial investment in socially-focused businesses in the European Union.
In the submission to the EC, Stephen Lloyd, chair of the Working Group, and partner at lawyers Bates Wells and Braithwaite, said the new consultation is welcomed, but warns that it is important that the social investment market “does not seek to run before it can walk”.
“A lot of work needs to be done to develop social business,” said Lloyd. “And to promote investment in social business, which to some extent precedes the development of any complex architecture for social investment funds.”
The Working Group goes on to urge the EC to explore the possibility of relaxing restrictions on retail investment into social investment funds, possibly through the use of investment caps for ordinary individual investors.
In the UK, in most cases if a charity or social enterprise wants to invite investment from a member of the public, the organisation must be approved by an FSA-authorised person, which can incur high costs and time.
But the Working Group suggests introducing a limit or cap, to which an individual can invest in a company, without it having to be authorised by a financial authority.
It cites an example from America, where the Obama administration is proposing the “Start-Up America” project which will reduce the high costs that smaller companies face when going public, and will raise the cap on “mini” public offerings from $5m to $50m.
The Obama administration says this will responsibly allow start-ups to raise money through “crowdfunding” – gathering many small-dollar investments that could add up to as much as $1m.
Data on social investment
The Working Group also urges the European Commission to seek to research and publish data about the levels of social business activity and social investment activity across the European Union, to track the development of this market.
And it says the Commission should provide dedicated funding for social business start-ups, especially for capacity-building and investment-readiness projects; explore the possibility of redirecting funds from the European Social Fund to national social investment initiatives, and encourage the provision of guarantees by the European Investment Bank to leverage private investment into the social investment market.
The UK Social Business Initiative Working Group was formed this year to agree a co-ordinated UK response to the European Commission consultation on social investment.
Its members are:
- Stephen Lloyd, senior partner, Bates Wells & Braithwaite (BWB), chair
- Alastair Ballantyne, head of communications, Big Society Capital
- Neena Bhati, European and international campaigns team, NCVO
- Mark Campanale, co-founder and director, Social Stock Exchange
- Paul Cheng, head of social investment at CAF Venturesome and chair of the European Social
Investment Taskforce - Luke Fletcher, Associate, BWB
- Oliver Henman, European and international campaigns manager, NCVO
- Robert Hodgkinson, senior investment manager, CAF Venturesome
- Ceri Jones, head of policy and research, Social Enterprise UK
- Martin Rich, director, Social Finance
- Karl H. Richter, co-ordinator of Euclid Task Force for a European Social Investment Facility and co- author of Making Good in Social Impact Investment
