By Marta Maretich
Definitions — we are so over them in the social investing sector.
I mean, we wrangled over those darn meanings for years: ethical investing, responsible investing, socially responsible investing, triple- and double-bottom-line investing, green investing, sustainable investing and finally — boom! — impact investing.
We split hairs, we waved banners, we made colorful infographics to settle the matter once and for all—and then, worn out with all the talking, we got on with the work of building the social investing sector and tried to forget about definitions for awhile.
Definitions are to social investing what balance and reaction time are to surfing: You need them, but if you think about them too hard, you just can’t stand up on the board.
On the other hand…
Once in a while a new definition comes along and we really need to pay attention.
That’s the case with the definition for social investing proposed by a new report, After the Gold Rush, from the Alternative Commission on Social Investment (ACSI). Rather than splitting yet more definitional hairs, this report highlights telling developments in the practice of social investing and yields a new, clarifying meaning for the term.
Before we get down to what that meaning is, let’s take a look at the source of this report.
The ACSI describes itself as initiative established “to investigate what’s wrong with the U.K. social investment market and to make practical suggestions for how the market can be made more accessible and relevant to a wider range of charities, social enterprises and citizens working to bring about positive social change”.
One look at this group’s spare website and signature image — a cupped hand, full of dirt, supporting a dead seedling — tells us that the ACSI are working in a very different key to, say, the G8 Social Impact Investment Taskforce. We’re not going to get cheerleading from these people, their branding suggests; they’re going to make us face facts.
The ACSI shuns the international glamor that has recently surrounded social investing. Its focus is national, not global. Its approach is practical, not theoretical or political. ACSI intends to cut through the hype. It wants to know, specifically and categorically, whether the U.K. social enterprise sector -- especially its largest player, state-bankrolled Big Society Capital -- has delivered all that it promised for social investing.
Problems range from basic errors — such as the assumption that social sector organizations don’t have access to finance from mainstream lenders (they do) — to more subtle but potentially damaging issues, such as a mismatch between the support social sector organizations actually need and the kind of finance social investors are currently offering.
Confusion around definitions is part of the trouble. The report rounds up a range of definitions from various authorities including the OECD, the Charity Commission and the U.K. Cabinet Office—all strikingly different. Then it offers a new one.
At the same time, a couple of things stand out about this particular definition. One is the statement that a social investment should be “autonomous of the state," which is to say, not politically motivated or subject to state control.
That’s an interesting stipulation to come out of the U.K., whose early leadership in social investing was based on the involvement of a series of governments who saw it, at least in part, as a way of shrinking the state benefits burden. It may also shine a light on why the U.K. seems now to have lost its position as a leader in social investing. Perhaps state control and authentic social investing are incompatible?
The second remarkable point about ACSI’s definition is the focus on “the mission of the investee as the principle beneficiary of the investment.”
This emphasis has the effect of directing attention away from the motives of investors and the mechanisms of investment, subjects that so often, in this sector, preoccupy us. It focuses instead on the impacts and outcomes of the investment, on the mission ends, rather than the means. This has a clarifying effect, reminding us of the real reason we are doing any of this investing at all, and keeping the focus of the argument practical and close to home.
One of them is that hype has the power to hijack even good ideas and prevent them from delivering results on the ground. Another is that there’s a danger of loss of focus in our sector, with the emphasis shifting away from social benefit and the organizations that can, with support, deliver it. A third is that more attention needs to be paid to the fact that, despite claims, most social investing is still subsidized in one way or the other — and that is fine, so long as it creates real benefit for real people.
But the biggest lesson of the ACSI report is probably that the presence of a dissenting voice in our sector is a very good thing. With its focus on the practical, and its satirical bent (“Social investing is dead!” reads one subhead, and another, “Long live social investing!”) it makes refreshing reading and should encourage others to pitch in and provide alternative points of view.
Now go and water your plants!
Image credit: Stock photos
Marta Maretich writes about impact, sustainable and social investing for Maximpact.com, a deal listing portal and information hub for the new finance sector. She is Chief Editor of the Maximpact blog.