Anand Shukla

So, has social investment finally come of age?

Views from the Good Deals 2009 National Social Investment Conference in London on 29 October were, predictably, mixed. UK Minister for the Third Sector, Angela Smith, noted that the financial crisis has stimulated a growing wider market for ethical products and services and provided a boost to ethical investment. A view shared by Pradeep Jethi, CEO of Social Stock Exchange, who said that today ‘people want a more social constructive capitalism’.

You didn’t have to look too far though to uncover a more bearish appraisal. Michael Quicke, CEO of CCLA Investment Limited, observed that interest in social finance is ‘quite conceptual’, and that there isn’t much of it about. Liam Black, co-founder of Wavelength, even began the conference by asking whether talk of social investment is ‘hot air’.

David Blood, co-founder of Generation Investment Management, argued that for social investment to work, social enterprises would need to decide that impact capital markets are important and change the way they work to become more attractive to investors. This uncovered a key tension at the heart of the debate: how do you bridge the gap between organizations not wishing to dilute their social impact through, for example, investor dividends with the desire of venture capitalists to make a return?

So, what is to be done? Nigel Kershaw, CEO of Big Issue Invest, called for government to incentivize the risk capital sector, complaining that it is disadvantaged in relation to charitable giving by Gift Aid, and that government financing is in danger of creating a monopoly and crowding out the private sector (interestingly echoing some of the critique of President Obama’s public healthcare option from US private healthcare providers). Michael Quicke’s focus was on the demand side, calling for social enterprises to make it ‘as easy as possible’ for investors ‘to invest’.

The most effective advocacy for the potentially transformative role of social finance came via the case study of Treehouse, a UK school for autistic children. With a turnover of £1.5 million, Treehouse needed to raise £11.5 million for its own building. Through a £5 million loan from Futurebuilders (now the Social Investment Business), it was then able, as a more viable proposition, to secure a loan from a commercial bank for £6 million. A successful capital appeal also raised £5 million, to be used in part for paying down the loan. Today Treehouse has 76 pupils and is repaying the loan ahead of schedule.

Asked to summarize his experience of social finance, Treehouse’s Financial Director, Martin Atkinson, was in no doubt. Despite the endless cashflow projections for nervous trustees, and the seemingly never-ending work involved in raising the finance, ‘this was a fantastic example of what can happen’.

Anand Shukla is Business Director of the Daycare Trust. Email ashukla@daycaretrust.org.uk

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