There has been a huge amount of attention on social investment recently. The Big Society Capital (formerly Big Society Bank) is racing towards getting state-aid clearances from Europe and the Big Society Investment Fund committee (housed by Big Lottery Fund – BIG) is starting to prepare the ground in this area.
Early investments have included £1m to a social investment fund run by the Private Equity Foundation to help disadvantaged young people into employment, education and training, and the market got a further boost last week when Deutsche Bank announced a £10m social investment fund. The fund will support sustainable social businesses that promise financial returns but also provide social benefits in their communities.
Despite these two examples, lots of people are asking where the demand is to meet the supply of cash. Is there really an appetite for this kind of funding proposition, and is the sector in a position to take advantage of it?
Clearly it's still early days for social investment and many charities and organisations – perhaps unsure of how it will work in practice, or whether it's a sensible option for them to explore – are still looking, learning, and thinking about dipping their toe in the water.
At BIG, we too are thinking carefully about the kind of role we can play in this developing market. Our new policy directions from Westminster are set to give us a locus for "strengthening and increasing the capacity of the social investment market for supporting public benefit and social action", which is an interesting prospect.
But the question is: how can we help to support the development of this market in a way that's distinct and adds value to the activity that's already going on? How can we support the sector to assess and take advantage of the opportunities social investment presents?
In the past few months we have funded some significant and transformational social investments, notably the Peterborough prison social investment bond (SIB), which is working to reduce re-offending rates in the area, and where BIG acted as a co-commissioner.
The Peterborough SIB is presenting the sector with a great case study for learning about social investment. BIG is supporting Social Finance to develop further social impact bonds. But it's exciting to think that with greater support and investment we could help to further unlock the huge potential that a wider range of social investment possibilities hold for the voluntary and community sector (VCS) in tackling social need.
To that end we are announcing today £6m to fund a range of developed social investment proposals that just need some extra funding – that final piece of the jigsaw – to pilot their social investment plans or put them into practice. For example, they might need money to develop a system to collect the data from which they can evaluate the efficacy of an intervention, or support with delivery costs.
These we hope will become a significant source of learning for the VCS, helping us to understand what worked in practice and what challenges were faced. Of course, answers to some of these questions won't be possible until the projects are well established, but we will benefit from a huge amount of learning from working alongside them as they progress and develop.
The sceptical among you may question why BIG is getting involved in social investment – many organisations are in financial turmoil and what they need is more lottery grants, not money spent on what could be described as funding experiments. Only a minority of VCS organisations will be able to benefit from social investment, you might also argue.
First, I want to reassure you that we recognise that social investment is not suitable for every organisation or for every social need, and that the vast majority of BIG's money will continue to be distributed through grants.
However, for some organisations that currently access lottery funding, social investment could be a very exciting prospect indeed – the chance not only to secure a more sustainable source of funding, but to scale up their work and have an even greater impact on the beneficiaries they seek to help.
If, through initiatives such as we are announcing today, we can help this market to develop and enable these organisations to diversify in this way, we not only open up more sustainable opportunities but liberate our own grant cash for the majority of organisations for whom social investment won't be relevant. And, particularly in the face of such economic uncertainty and increasing demand on VCS services, that can only be a good thing.
Peter Wanless is the chief executive of the Big Lottery Fund
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