UK social investors must address dangerous inequality levels, new report demands
A “big mental shift” is needed among social investors if they are to address inequality – including actively seeking out campaigning groups and other equality-focused organisations for their portfolios.
This is the message of Equality Impact Investing: From Principles to Practice, a report published on Wednesday by the Equality Impact Investing Project, created in 2016 with funding from the Connect Fund and support from Social Investment Business.
Introducing the report, author Ceri Goddard said investors are currently addressing inequality only in a “relatively limited” way, and need to move from just including equality-focused outcomes, to actively targeting them. Some do so already, often by investing in marginalised entrepreneurs — but they could also back organisations mitigating the effects of inequality or addressing its root causes, invest in other types of business with good internal or supply chain standards, and improve diversity among their own teams.
The report comes just weeks after UN experts slammed government policy for its effects on extreme poverty, and after a leading UK economist warned that the nation is heading towards extremes of inequality similar to the US. Speaking at the report launch on Wednesday, executive director of The Equality Trust Wanda Wyporska, echoed this, saying Britain has become one of “the poster children for inequality”.
Britain has become one of the poster children for inequality - Wanda Wyporska
Social investors appear interested in doing more: 63% of those surveyed for the report said they need and want to increase the level and range of their equality impact. Big Society Capital’s new property fund providing housing for vulnerable women is among recent moves in this direction.
But Goddard said Big Society Capital, as well as others including Access - The Foundation for Social Investment and the government’s Inclusive Economy Unit, could go further to make equality goals an explicit part of their planning, rather than just listing equality as one of their values.
Colleen Ebbitt, a senior policy advisor at the Inclusive Economy Unit, which sits within the Department for Digital, Culture, Media and Sport, said her unit was already “doing an awful lot”, including creating funds tackling health inequalities and regional income inequality. Ebbitt also said the creation of the UK’s new Impact Investing Institute – which is independent of government but funded by DCMS, among others – was “a really great opportunity to talk about embedding equality goals, and we’d really encourage that. So that is a new opportunity for engagement for anyone in the room.”
Seb Elsworth, CEO at Access, said he’d assumed “it might be really hard” to find potential investees in this field: advocacy, campaigning or giving advice don’t typically generate a surplus. But “that’s a complete misconception”, he said, with “a whole range of trading activity” already happening: just under a third of the organisations surveyed in the report were trading services or goods. “I think there are really strong foundations in terms of business models that can be supported by the use of investment,” he said.
There are really strong foundations in terms of business models that can be supported by the use of investment - Seb Elsworth
While the report highlights some examples of equality-driven investment – such as Social and Sustainable Capital’s loan to Preston Road Women’s Centre – Wyporska highlighted some of the challenges that might come with investing in organisations like her own.
First, it can be very difficult to demonstrate the impact of a campaign – policies or behaviour may change, but that often can’t be attributed directly to one group’s work. Second, her sector is still quite resistant to what many see as the “language of banking and finance” and the idea of their work as a market product. “I wouldn’t go so far as to say distasteful, but the tension between investment to reduce inequality at all sorts of levels is quite a difficult one for some people to stomach,” she said. “This is quite a new area for a lot of charities.”
That may soon change. Charities and community groups are “beginning to have a much more open mind”, Wyporska said, not least because getting core funding is so tough – particularly for an organisation that’s often critical of government, and isn’t a “nice cuddly animal charity” that would appeal to public donors. Given the everyday pressures of keeping an organisation running, she welcomed the recommendation to investors to actively target potential investees: “We would really welcome that engagement to discuss this more.” In case the investors in the room were in any doubt, Wyporska added: “We at the Equality Trust are more than happy to be targeted and more the happy to be tested on.”
Header photo: Children take part in a theatre workshop at the Equality Trust 'Speaking Truth to Power' event. The event, which took place at the same time as Davos 2019, highlighted the gross wealth inequalities in our society. Credit: Boris Burner
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