Sir Ronald's G8 Taskforce plan to unleash $1 trillion in social impact investment
The Taskforce on Social Impact Investment, set up by UK Prime Minister David Cameron during the UK’s presidency of the G8, and chaired by Sir Ronald Cohen, today launched its Taskforce report in Downing Street, London, alongside Chancellor of the Exchequer, George Osborne.
The Report, entitled Impact Investment: The Invisible Heart of Markets – Harnessing the power of entrepreneurship, innovation and capital for public good, calls on governments and the financial sector to grow the social investment market by unleashing the billions of dollars locked up in charitable endowments, pension funds and private wealth.
J.P. Morgan estimates that $10.6 billionn can be broadly classified today as social investment. The market is predicted to grow to $1 trillion over the next decade, according to a study by JP Morgan and the Deloitte Monitor Institute, which would make it 1% of global assets.
To drive the market to its $1 trillion benchmark, the taskforce of 200 government and private sector experts from across the G7, the EU and Australia, have agreed on a series of high level recommendations.
Bringing together innovations from across the globe, the report highlights the potential to drive social progress with social investment – investments made into businesses and social sector organisations, directly or through funds, with the intention of generating social and environmental impact alongside a financial return.
Taking inspiration from France
The report calls for pension funds and providers of tax-advantaged savings schemes and products to include social investments as part of their offering. Since 2010 french companies with over 50 employees have been obliged to provide a socially-oriented pension scheme to employees. These pension schemes (Fonds Commun de placement d’Entreprises Solidaire) invest 5-10% of their outstanding in social enterprises or social funds.
Looking to the UK
The report also calls for governments to create regulatory and tax incentives for investment in social enterprises and charitable organisations, enabling investors to offset their social investment income against tax. In the UK a Social Investment Tax Relief has been set up to attract mainstream investors and independent financial advisors to consider social investments with clients.
Pointing to the work of Big Society Capital, the UK's social investment bank, which lends to social investment intermediaries so that they can fund social enterprises and charities, the report recommends that governments set up social investment wholesalers funded with unclaimed assets.
Sparking public sector innovation
Governments are also encouraged to develop social impact bonds, partnerships between government, charities and social investors, to deliver public services. There are currently several social impact bonds delivering social services in the UK, the US and Canada on a payment by results basis. Under the social impact bond model commissioners only release money and investors are only paid back if outcomes are acheived.
Commenting on the Report, Sir Ronald Cohen said: “ This is not about increasing or reducing public expenditure, but helping government to benefit from innovation and private sector capital in order to achieve more impact with the money it has.
In driving the achievement of impact, social impact investment harnesses the forces of entrepreneurship and capital and the power of markets to do good. It brings the invisible heart of markets to guide their invisible hand.”
Reflecting on the current state of social investment, Rosemary Addis, founder of Impact Investing Australia and member of the Taskforce told Pioneers Post:
“We are seeing a new wave of organisations combining profit and purpose and utilising market mechanisms to deliver public goods and for them impact investing is core business. It is still a sub-sector of each of these groups that know about impact investing and a smaller group again that have translated interest to action."
The challenge is in “lifting up the experience of those who are already active and encouraging more people and organisations, more governments, and a broader range of participants into the market,” she said.
As the Taskforce concludes it is looking to push social investment onto the agendas of the G20, ASEAN, OAS, and the African Union, into the plans of the World Bank and onto the radar of the UN as it resets its Millennium Goals in 2015.
Further reports from the eight National Advisory Boards set up by the Taskforce and containing country specific recommendations were also announced today.
From 10am GMT:
The full list of recommendations can be found in the Taskforce report.
The full report can be downloaded here.