Growing the social investment market: A vision and strategy

HM Government, February 2011

More than 10 years ago the UK commenced efforts to establish a social investment market with the first step in this journey being the formation in 2000 of the UK Social Investment Task Force.  A final report by the Task Force, Social Investment Ten Years On, completed in April 2010 revealed the critical role the Task Force’s initial five recommendations have played over the past decade in shaping social investment in the UK.  It is however recognised that despite the progress made since 2000 the market remains embryonic and inefficient as evidenced by the limited market size, lack of investment readiness, fragmented deal flow, absence of standard deal types, high transaction costs and restricted insight into deal pipeline. Much still needs to be done to see a robust social investment market truly come to fruition.

Growing the Social Investment Market: A Vision and Strategy released by the UK Government in February 2011 picks up on a number of the suggestions for future action contained in the Task Force’s final report. The goal of the strategy is to create a new, self sustaining market that will:

  • Provide social ventures with access to capital and advice to enable them to better contribute to building a bigger, stronger society; and
  • Create a new asset class of social investment that connects social ventures with mainstream capital

The strategy sets out four key actions to grow the social investment market, namely:

  1. Create a third pillar of finance for social ventures that blends social and financial returns and creates a new asset class that complements giving and funds from the state.
  2. Provide an enabling environment for social investment including consideration of opening public services to create new opportunities for social ventures, tax incentives, regulatory and legal framework for social investment, building better ways of measuring social return, and supporting investment readiness of social ventures.
  3. Establish the Big Society Bank as a catalyst for growing the amount of private capital available for social ventures.
  4. Encourage new social finance intermediaries to enter the market that are able to develop a new asset class and make available social investment opportunities to individuals and fund managers plus unlock charitable income and endowment assets for social investment.

The report details implementable actions ranging from direct intervention through to enabling policy and regulation.  Specifically, six areas for Government action to improve the supply of finance and champion social investment are discussed including: open up and localise public services thus creating opportunities for social ventures; explore appropriate tax incentives for social investment; create the right business environment for social ventures including legal and regulatory framework governing how social ventures and investors act in the market; support social ventures to improve investment readiness and business capability; improve market infrastructure to help social investment grow; and create the Big Society Bank.

On the topic of growing social investment, it is worth noting that the report by the Canadian Task Force on Social Finance, Mobilizing Private Capital for Public Good, released in December 2010 contains seven recommendations for actions with not dissimilar themes to those under discussion for the UK.

To read the full article see: www.cabinetoffice.gov.uk/resource-library/growing-social-investment-market-vision-and-strategy

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