Here at NPC we’ve been working with organisations and individuals across the world to think about the power of social investment to solve protracted problems. The efforts of the Social Impact Investment Taskforce has borne fruit—now it’s time to separate the practical recommendations from the hype.
Today the long awaited report of the Social Impact Investing Taskforce, established by the G8, is published. Sir Ronald Cohen, the chair, and all the teams in different countries that have been working hard on this over the last year since the British presidency of the G8 kicked this off, have done sterling work. This is a landmark report.
It looks at many of the issues that need to be tackled if the growth of the exciting area of impact investing—investors looking for social as well as financial return—is to succeed and maximise its potential to do good. These range from the measurement of outcomes (otherwise all the talk of ‘impact’ may just be hype) to how to build markets for impact investing.
But of course there is a long, long way to go. Right now, we cannot really be sure how far we will ever get. Talk of billions or even trillions of dollars in social or impact investing gets bandied around, but it is simply too early to know what the potential is for investment that genuinely delivers impact, rather than just using the phrase.
Indeed some of the language can mislead those in the non-profit sector, who feel that they can access some of this loot, especially when funding is drying up from other sources. In truth, much of this investment is not and never will be for them. They don’t have the revenue streams to make it sensible, they don’t have the ability to manage risk, nor the desire for growth, both needed to make it an attractive option. As we know from the microfinance area, a great deal of excitement and a mini gold-rush can emerge where there seems to be an area that has major social potential and can deliver good financial returns—only to discover that, while important, the area was somewhat over-hyped both in terms of social impact and commercial returns.
Some of impact investment and social investment will undoubtedly be great. This will focus on achieving measurable and social outcomes which are rigorously evaluated and reported on. We salute that. The working group that we have co-chaired has had a sharp focus on making sure that impact measurement can be built into what investors do, and makes sense from the point of view of those in whom they’re investing. And it sets out a vision of how the impact investing market needs to evolve if we’re to get to a point where the data we’re using is as robust, comparable and valid as it ultimately needs to be.
A bit of it will go into things like Social Impact Bonds, an innovative way of providing public services while minimising the risk falling on the public sector (although again the jury is out on how important these will ever be). Much of the rest, while useful, will just be twisting a portfolio towards companies that look more ‘social’ than others—and some will not even want to make a financial sacrifice in terms of returns to achieve it.
So the work goes on, and we must be ambitious in this area. In the meantime, this Task Force will have done its job if it avoids setting impossible targets and helps us continue the hard work of making this new area of investment hum.
NPC offers social investment training to funders and donors, with the next session taking place on 21 October.