Prioritising Impact: Bracing for impact

How do we deal with failure? When an investment is not going well, how do investors make the trade-off between financial and social return? This frank discussion covered difficult choices and how we can develop shared values and best practices for an impact first approach to investment. 

When your investees go quiet, perhaps it’s time to pick up the phone and find out what’s going on. 

In the ‘Bracing for Impact’ session at The Gathering, delegates took part in an open and honest discussion about what happens when social investments go wrong.

Sharing stories of painful failures, several people highlighted the importance of communication. 

One investor said of their investee: “They went quiet and this was a red flag, but none of us picked it up at the time.” The investee, a social enterprise which had £3m of social investment to repay, had cashflow problems and was struggling to manage its interest repayments. However, the group of investors – which had only requested annual reporting – didn’t find out until several months down the line.

Developing trust between investees and their investors was crucial, delegates concluded. And if things started to go wrong, then being honest and working creatively together could allow solutions to be found.

Another investor, who supported a charity to develop a trading subsidiary to sell a product in  the commercial marketplace, emphasised how important due diligence was and the need to seek specialist analysis where necessary. “The investee couldn’t compete in the commercial market and not much impact was created,” she said. “We should have commissioned specialist support at the beginning.”

Working together, the delegates began to co-design a decision tree of what to do when projects begin to go wrong, considering the perspectives of beneficiaries, investors, social investment intermediaries and the investees.

Key actions:

The session hosts, Holly Piper of CAF Venturesome and Daniel Brewer of Resonance, committed to take forward work on the decision tree, which will be shaped and reviewed by the sector over the coming months.