Oliver MacArthur writes:
Since the global financial crisis, the media regularly accuses the financial industry of placing profits before people.
In the face of this criticism, the finance sector has continued to innovate and socially conscious investors have demanded new investment products that explicitly consider environmental, social and governance impacts.
Social impact investment provides a great opportunity to change society for the better by combining financial sustainability and investment returns with explicit positive social outcomes.
Social investments and the social enterprises they support deliver benefits to the disadvantaged and actively seek to employ the socially and economically marginalised, including ex-offenders, the long-term unemployed and disabled people.
At a recent interactive policy discussion held by the Young Fabians Finance Network, attendees came together to discuss how the finance sector could help to solve social problems.
It was argued that social investments, business collaboration with charities and greater transparency in pension investment were important to help achieve these goals.
The panelists included Lord Andrew Adonis and senior figures from Big Society Capital and the UN Principles for Responsible Investment; this was the first in a series of events within 2015 to promote the role of finance and business in delivering greater social returns.
In recent years, the coalition government has been leading the way in the development of responsible investment solutions and social investment with the launch of Big Society Capital in April 2012.
More recently in the chancellor’s budget, the Cabinet Office announced the launch of seven new social impact bonds with a focus on, disadvantaged young people and those with long-term mental illnesses.
Alongside the focus on social impact bonds, the government has also announced the creation of the Access Foundation.
Described as a sister organisation to Big Society Capital, the charity has been given £100m of funding to support capacity building initiatives to help charities and social enterprises to access social investment.
However, the growing policy momentum surrounding social investment has been met with caution and criticism.
Some quarters of the left may suspect that social investment is a stalking horse, and hidden amongst its ‘social innovation’ is a veiled mechanism for the withdrawal of the state from the provision of public services.
This is wrong – no party has the monopoly on good ideas and social investment should be viewed as a complement not a replacement to traditional state-led interventions.
As a result, financial sustainability, profits and social justice are not diametrically opposed but partners in progress.
Whilst the values of fostering strong communities, social justice and decency are perpetual, the methods must continue to change and adapt in a dynamic and ever-changing country.
In a recent study of the asset management industry, the professional services firm PwC estimated that worldwide assets under management by investment firms would exceed USD $100 trillion by 2020.
Given this enormous amount of capital is due to be committed to the financial markets, it is clear that even a few basis points of this figure dedicated to social investment will have a material and positive impact in our communities.
Following the unfortunate results for Labour in the recent general election, it is essential to put forward new ideas and challenge old certainties.
A renewed enthusiasm for social investment would be a natural extension to the Labour narrative on responsible capitalism and these innovative methods can help foster a more sustainable relationship with enterprise and wider society.
Whilst social investment is not the silver bullet to the problems of poverty and deprivation, it would be unwise to underestimate its power to help build a better Britain.
Since the global financial crisis, the media regularly accuses the financial industry of placing profits before people.
In the face of this criticism, the finance sector has continued to innovate and socially conscious investors have demanded new investment products that explicitly consider environmental, social and governance impacts.
Social impact investment provides a great opportunity to change society for the better by combining financial sustainability and investment returns with explicit positive social outcomes.
Social investments and the social enterprises they support deliver benefits to the disadvantaged and actively seek to employ the socially and economically marginalised, including ex-offenders, the long-term unemployed and disabled people.
At a recent interactive policy discussion held by the Young Fabians Finance Network, attendees came together to discuss how the finance sector could help to solve social problems.
It was argued that social investments, business collaboration with charities and greater transparency in pension investment were important to help achieve these goals.
The panelists included Lord Andrew Adonis and senior figures from Big Society Capital and the UN Principles for Responsible Investment; this was the first in a series of events within 2015 to promote the role of finance and business in delivering greater social returns.
In recent years, the coalition government has been leading the way in the development of responsible investment solutions and social investment with the launch of Big Society Capital in April 2012.
More recently in the chancellor’s budget, the Cabinet Office announced the launch of seven new social impact bonds with a focus on, disadvantaged young people and those with long-term mental illnesses.
Alongside the focus on social impact bonds, the government has also announced the creation of the Access Foundation.
Described as a sister organisation to Big Society Capital, the charity has been given £100m of funding to support capacity building initiatives to help charities and social enterprises to access social investment.
However, the growing policy momentum surrounding social investment has been met with caution and criticism.
Some quarters of the left may suspect that social investment is a stalking horse, and hidden amongst its ‘social innovation’ is a veiled mechanism for the withdrawal of the state from the provision of public services.
This is wrong – no party has the monopoly on good ideas and social investment should be viewed as a complement not a replacement to traditional state-led interventions.
As a result, financial sustainability, profits and social justice are not diametrically opposed but partners in progress.
Whilst the values of fostering strong communities, social justice and decency are perpetual, the methods must continue to change and adapt in a dynamic and ever-changing country.
In a recent study of the asset management industry, the professional services firm PwC estimated that worldwide assets under management by investment firms would exceed USD $100 trillion by 2020.
Given this enormous amount of capital is due to be committed to the financial markets, it is clear that even a few basis points of this figure dedicated to social investment will have a material and positive impact in our communities.
Following the unfortunate results for Labour in the recent general election, it is essential to put forward new ideas and challenge old certainties.
A renewed enthusiasm for social investment would be a natural extension to the Labour narrative on responsible capitalism and these innovative methods can help foster a more sustainable relationship with enterprise and wider society.
Whilst social investment is not the silver bullet to the problems of poverty and deprivation, it would be unwise to underestimate its power to help build a better Britain.
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