Beyond Big Society Capital: a future shaped by ‘socialised investment’?

April 30, 2012 by
Filed under: Social Economy 

Many have spoken of the potential value of social investment, or investments that include both financial and social returns. Building on initiatives from the previous government, the current government has articulated a vision and strategy for growing the social investment market. The Big Society Bank (now renamed Big Society Capital) forms a core part of this, but the underlying aim is to provide the infrastructure and support necessary for the social investment market to overcome various barriers to its growth. While social investment has been growing, there are several problems that limit its potential scale, such as a lack of investment readiness on the part of social ventures, lack of market information, and cultural and behavioural barriers among both those running social ventures and potential investors. This is why much of the debate on the feasibility of social investment has revolved around the importance of ‘social market intermediaries’ that are able to provide the expertise and infrastructure required to connect funds to appropriate social ventures, and to enhance the market readiness of social ventures.  

A fundamental shortcoming is the lack of a focus on giving citizens a greater stake in social investment. Social investors are predominantly rich individuals (such as philanthropists) or large organisations, and social investment is typically associated with social enterprises

But it might also be argued that an even more fundamental shortcoming is the lack of a focus on giving citizens a greater stake in social investment. Social investors are predominantly rich individuals (such as philanthropists) or large organisations, and social investment is typically associated with social enterprises. In comparison, citizens have very limited opportunities to become social investors, which isn’t helped by the lack of engagement with social investment by institutional investors such as pension funds.

This absence of a democratic space for citizens to develop a greater stake in social investment has led Bristol City Council to pursue its forward-looking Building a Better Bristol programme (which 2020PSH will be assisting), which is working on developing credible investment products and governance structures to support ‘socialised investment’ – getting the wider public, businesses and institutional investors involved in investing in the social and economic development of the city while ensuring financial feasibility and investor confidence.  

Bristol City Council’s Building a Better Bristol programme is working on developing credible investment products and governance structures to support ‘socialised investment’ – getting the wider public, businesses and institutional investors involved in investing in the social and economic development of the city while ensuring financial feasibility and investor confidence

At a time of austerity and debates about how public services and economic and social development can become more sustainable, productive, and locally relevant, ‘socialised investment’ raises some very interesting long-term opportunities for local government, including:

  • A new role for local government. As localism becomes more embedded in statutory and policy frameworks, local government can carve up an enabling local leadership role (possibly having a ‘social market intermediary’ role of its own) to catalyse social change and public service reform.
  • Public money can be combined innovatively with pooled socialised investment funds and leveraged to collaboratively finance services and developments, which could also help relieve pressure on cash-strapped local authorities.
  • The commissioning and delivery of services will theoretically be more intertwined with what citizens want from their services. While tax is a legal obligation, social investors will expect not just a financial but also social return – and this will need to be negotiated with citizens.  Expectations of social returns will also have implications for the degree to which commissioning is based on the generation of social value. It will also have the potential to reshape how we should think about productivity in public services – something 2020PSH will be exploring soon.
  • Greater local accountability and transparency, and greater local distinctiveness.

2020PSH has long argued for social productivity as an organising principle for public services – that is, public services should be judged according to the degree to which they help citizens, society and local communities achieve the social outcomes they desire. If it works, and if it is able to successfully scale out across the country in the long term, ‘socialised investment’ could be a fundamental part of socially productive public services. While it certainly is at its very infancy, the potential is also great.

@atif_shafique


Comments