Can social investment really change the world?
Monday, February 6, 2012
"There are few moments like this when something happens that can really change the world". That was the proclamation of Cabinet Office minister Francis Maude last summer as plans gathered pace to develop the UK market for social investment. Was he going a bit over the top? Perhaps; but only perhaps.
Social investment could become a vital source of finance to fund programmes of work with children, young people and families over the next few years. But it is a complex field easily open to misunderstanding and myth. There are two basic facts to get straight. First, social investment is repayable finance. So it must not be regarded as a replacement for grants and donations.
Second, it requires service providers (such as children’s and youth charities) to achieve a social – as well as a financial – return, in the form of improved outcomes for the service recipients. In a growing number of arrangements, money is repaid to investors on the basis of reaching agreed benchmarks for these improved outcomes – which can be school attendance levels in children, for instance, or sustained employment for young people.
But make no mistake: social investment’s time has come. Maude was speaking at the official launch of Big Society Capital, which will open for business at the end of March. Armed with a tidy kitty of £600m – from the unclaimed assets of dormant bank accounts, plus contributions from the big-four banks – its mission is to grow the social investment market by bringing understanding to the social sector and building bridges with charitable foundations and the wider financial community.
Service providers hoping to take advantage must present a convincing case to investors that their work makes a real difference to people’s lives and communities, based on clear evidence and robust data. For many, that remains a major challenge – as are all the legal and auditing issues to consider. The Young Foundation is offering sessions for youth charities on "investor readiness" to help with this. Large chunks of capital are not about to be dished out on a plate.
One area in which social investment has the potential to make a big difference is in the Prime Minister’s renowned quest to turn around the lives of 120,000 "troubled families". Our calculations lay bare how the whole enterprise as it stands is ludicrously underfunded, given the cost of interventions known to work for families with complex problems – such as multi-systemic therapy and family nurse partnerships. But a number of local authorities have been exploring the potential for social investment schemes to finance such intensive programmes. The experiences in Essex, Liverpool, Westminster, Leicestershire and others will hopefully provide valuable lessons.
So social investment can change the world. Whether or not it will, however, depends on the combined efforts of the children’s sector and investors to seek mutual benefit. And whether they manage that depends in large part on the facilitators – or intermediaries – to broker the deals and manage differences in professional language and culture.
Patience will be paramount. "We’re all in this together," as they say.
Ravi Chandiramani, editor, Children & Young People Now