Building the market: Building the social investment infrastructure

How do we make social investment work better? Who’s doing what to build the infrastructure, how does it fit together, and how do we know it’s really helping? Who should be involved, who pays for it, and how do we build a collective sense of what’s most important?

Social investment has come a long way, but most of it has focused on products and product development. This risks an under-investment in the ‘infrastructure’ or ‘plumbing’ that helps the social investment market operate more effectively. This includes things like collective work on data (to improve information on what works); shared management systems (helping intermediaries save costs and work smarter); advocacy work (helping the whole social investment sector); and local infrastructure (helping connect social investment and the organisations it is intended for).

Jessica Brown, from the Connect Fund – which was set up to help strengthen the social investment market – talked about the projects that the fund had been supporting, including Singlify (a management information system) and the open data standards project, which is hoping to help achieve for social investment what 360 Giving has done for philanthropy. 

Andrew O’Brien from Social Enterprise UK, which chairs the Social Investment Forum, gave an overview of their work in convening intermediaries to work together and undertake joint policy work in particular. 

Carol Botten from Voluntary Organisations’ Network North East (VONNE) explained how most voluntary, community and social enterprise organisations in the country were still a long way from taking on investment – or even from figuring out a sustainable business model. Most had never met a social investor, she said – and most were located far from London, where the majority of investors have based themselves.

Botten also talked about how local-level infrastructure organisations are themselves struggling to survive, and that it is easy to dismiss social investors when facing such pressures. Converting these people and their organisations to champions of the social investment cause could have a huge impact, though. Social investors could proactively champion local infrastructure organisations, which could help change the dynamic. Similarly, looking at peer-to-peer support, and more product development that speaks to and learns from investees, would help close the gap, be it perceived or real.

The discussion then ranged more widely: for example, into how social investment intermediaries themselves require support, and on the ongoing need for a relationship to government – not only to respond to relevant consultations on regulation, but to reach out beyond the Department for Digital, Culture, Media & Sport (DCMS), and also to advocate for the patient capital and subsidy the market requires. 

There was also concern expressed that many projects funded by the Connect Fund and others might not be sustainable, might not yet have a business model or would still require ongoing grant funding – and it was not clear where that might come from in all places. The question was asked as to what might be done collectively by interested parties and – put bluntly –  who would pay for this infrastructure work in the medium-term?

Overall, people felt that there were several different conversations to have here – one was about the ‘plumbing’ of social investment, and how that is built, improved and maintained; one was about the need for pre- and post-investment support for charities and social enterprises; and one was about the disconnect between social investment and the wider sector, and the associated pressures on local infrastructure organisations.

Key actions:

Work together to update and share a social investment infrastructure map. This should help raise people’s understanding of the many projects currently in progress.

Look carefully at what’s already working well, and what’s not. For example, the Growth Fund from Access has been distributed more quickly than expected. On the other hand, dealflow data is everywhere but data on how much individual investors have drawn down is elusive. Such information would help us see who’s doing their job well.

Convene a conversation now between relevant players, using the map as a starting point, on how to prioritise and collectively resource key parts of infrastructure.

Revisit leadership of the Social Investment Forum (currently chaired by Social Enterprise UK); encourage smaller funds in particular to get involved; and consider whether a more formal structure is needed to represent the sector, and what capacity it needs.

Relevant people need to get together to make a strong case for investment in infrastructure, including in local-level infrastructure organisations – who may not necessarily be doing social investment themselves but can champion it among small enterprises with little knowledge (and perhaps distrust) of social investment.