Pioneers Post

Good Deals 10: Bond and bank are vital to sector’s growth, says Cohen

16 November 2010
Sir Ronald Cohen

'Social investment needs political leadership and I think it would be best for you to do it'


Sir Ronald Cohen (pictured) to civil society minister Nick Hurd

The Social Impact Bond and Big Society Bank are the key developments in social investment that will enable social enterprises to deliver the government’s Big Society vision.

In a debate on the Big Society during the first day of the Good Deals social investment conference, run by Social Enterprise, a panel of investment experts, including the father of social investment, Sir Ronald Cohen, agreed that a new culture of social investment was emerging – one that was essential to the sector’s growth.

Civil society minister Nick Hurd, who was also on the panel, said it was up to government to get the Big Society right to ensure the ‘step change’ happened. But he stressed that government should not get in the way with its ‘size 11s’.

However, alongside social investment, the panel said there needed to be more emphasis on proving impact.

Cohen, chair of Bridges Ventures and The Portland Trust, and director of Social Impact Bond developer Social Finance, said the Big Society Bank was ‘crucial to the architecture of social investment’ and the bond could be a ‘major vehicle for funding’.

‘This is needed in the social sector if we are to develop successful and sustainable organisations that are going to cope with the scale of the social problems we face,’ he said.

Cohen, also former chair of the Social Investment Task Force, added that social investment needed some government help and looked at Hurd when he said: ‘Social investment needs political leadership and I think it would be best for you to do it.’

Hurd, pictured left, reiterated that the Big Society Bank, due to launch next April, would have at least £60m in its fund when it started. And he recalled the government’s promise that 100 per cent of dormant bank accounts would be used. It is estimated that there could be up to £400m in dormant bank accounts. Whatever amount makes the Big Society Bank, Hurd said it would be topped up three-fold from private investment.

While optimistic about the future, Hurd also told delegates the government was not naïve about social investment.

‘It’s hard to access patient capital [investment from investors who are not in a hurry for its return] and we want to provide the proposition that you and I can invest for good and get some or all of your money back. If we can achieve that, then we can open up a third leg of funding for social enterprise, charity and the voluntary sector to sit alongside philanthropy and the public sector, he said.

‘But we’re not naïve. We know the market is small and there are lots of risks, but we can also see investing opportunity.

‘We want to play a part in encouraging and supporting it because the prize is substantial if we get it right.’

Small support

Hurd also distinguished between the large scale social enterprise in the UK and the smaller, local level ones. Opportunities for both, he said, would be found in the Big Society and localism agenda, as well as a result of a public services reform white paper due next year. But there would also be support for the ‘tiddlers’.

Lack of support for ‘tiddlers’, a term used by Dawn Austwick, CEO of the Esmee Fairbairn Foundation to describe the small, local level start ups, could result in the failure of new social investment funding streams, she said.

‘There’s a real risk that the tiddlers are going to be left behind – the ones that want to change the world but haven’t got the muscle. Scale is a challenge that’s not yet been realised. Social Impact Bonds will help, but if the tiddler can’t benefit from this then I think we would have failed.’

Nick O’Donohoe, global head of research at JP Morgan, hailed the UK’s emerging asset class as a world leader, progressing faster than the US, as well as announcing that some new research on defining social metrics and impact measurement would be announced on the JP Morgan website later this week.

All but two per cent of 1,100 surveyed, he said, carried out there own social metric report – meaning just two per cent carried out audited social reports.

But he admitted that if it were easy, ‘we would have all done it already’.

Cohen said metrics were needed if a social enterprise was serious about scaling up its business and increasing it social impact.

‘When you start to think about being a social enterprise that wants to build a serious organisation that will have a social impact, you have to think about metrics,’ he said.

‘You need to prove that you have made that impact to your donors and investors. The emphasis on metrics is going to go on expanding. Every social organisation can define their metrics.’

Hurd added that a shake up in public service deliver and a demand for money would increase the need for transparency and put more demand on commissioners.