Social credits could help ‘undercapitalised’ sector, says report

A ‘social credit’ scheme, similar to carbon credits, could help the ‘chronically undercapitalised’ civil society sector, says a new publication on the importance of social investment.

Understanding Social Investment, put together by voluntary sector chief executives’ body Acevo, The Social Investment Business and the Royal Bank of Scotland (RBS), brings together a collection of articles by experts on what should happen next to grow social investment.

Launching the report last week, deputy CEO of Acevo Peter Kyle said: ‘A huge weight of expectation rests on the sector…[to] show what impact we can have, particularly in the context of public cuts and the Big Society agenda. Yet currently the sector is chronically undercapitalised.

‘Social investment, therefore is key.’

In his article, Acevo adviser Matthew Pike, who is working on a number of social investment initiatives, but writing in a personal capacity as a consultant, argues that government should explore the role of ‘financial impact trading’.

He says the next ‘logical step’ of the financial services tax already proposed by the government is the ‘mandatory disclosure of the social impact of investment decisions’ by banks, investment banks and hedge funds.

Once this had been established these organisations could earn a ‘social credit’ from their pro-social investments, which would reduce the financial services tax they would have to pay.

What’s more, Pike suggests that social credits, like carbon credits, could be tradable, with specialist social investors selling credits to mainstream institutions and thus creating a new revenue stream for them.

‘In this way we would not just raise tax revenues and punish bad behaviour among banks, but also encourage and resource better behaviour in the future,’ said Pike.

Commenting on the ideas in the publication The Social Investment Business CEO Jonathan Lewis said: ‘Realising the vision of the Big Society will require big changes – new ways of strengthening the sector and new ways of organising the sector.’

Other ideas talked about in the publication include social impact bonds and community ownership. It also offers practical advice to help organisations get investment ready.

You can download the report below.