The UK Good Deals conference kicked off with more warnings than aspirations for the future of social impact investment. A panel made up of banks and charitable trusts expressed the need for metrics and a new multiplicative understanding of a social asset class– all big asks that hinge on behavioural change.
One of the most important and simultaneously most fruitful and potentially disastrous area in the future of social impact investing is metrics.
Sir Ronald Cohen, chairman of Bridges Ventures, expressed the need for social entrepreneurs to develop impact metrics in order to mainstream social impact investing and thus grow the sector.
Concern on the issue of metrics was raised by Nicholas Hurd, MP and Minister for Civil Society, that larger organisations will have the capacity to invest in developing metrics for their activities rather than smaller social enterprise institutions– who might then be excluded from future investment because their metrics simpler aren’t as good.
Dawn Austwick, CEO of the Esmee Fairbairn Foundation spoke from her background in the arts saying that investors must be careful with their expectations of metrics because in the arts, outcomes are often hard to quantify and define.
The challenges surrounding measuring the impact of social investment sound a lot like the minefield that is measuring the impact of economic development financing. After several decades of analysis, the economic development community has never decided on anything that resembles an answer only well-defined the minefield: investors need for metrics often get in the way of measuring the impact of projects, projects often aren’t equipped with the capacity to develop relevant metrics and then end up showing less ‘success’ than there is, be careful your metrics aren’t pre-defined in a way that prevents your from calling something a success when projects often change so much on the ground, etc.
Metrics will also be useful in expanding social impact investment: it’s about getting investors to see the potential gains from social impact investing, explained RBS and JP Morgan representatives Duncan Sloane and Nick O’Donohoe. Both men said that it will take a while to develop the financial infrastructure for this new asset class. The asset class they are referring to is social impact bonds, the widely touted tool on which the sector hangs it hopes. Social enterprises will (hopefully) one day be able to issue the bonds to fund further investment in their activities.
Part of the challenge, according to the bankers is that investors are reluctant to get involved where there is a lack of a track record of an asset class, exemplified by the lack of “indices and ratings and performance metrics” for social impact investments. They promised such an index was in the works but would take time. They also emphasized that once financial intermediaries in the social impact investment market take their place in the overall social impact finance infrastructure, it will be easier for these metrics to come online.
O’Donohoe in particular pointed out that that it’s about getting investors to see not only the reputational upside of doing social impact investment, but getting them to factor it in long-run business investment decisions and cost-savings.
Part of the asset class infrastructure, as pointed out earlier this month at a conference on co-production in Manchester, is getting people to believe in themselves (and their organisations and businesses) as social impact assets. This discussion around defining and identifying a unified terminology is often under-appreciated in the success of movements. But it is important for the sector so that the assets understand their value and also in defining themselves as such, know that they have access to resources set aside for them.
The Big Society requires behavioural change– from investors, from the public and especially from government, how it interacts with, understands, and encourages social enterprise. Cohen urged Hurd to lead the charge within government to change how civil servants think about “the Big Society way of doing things.”