Too many ‘fancy-pants bankers’? UK social investors criticised for lack of frontline experience
UK social investment bosses faced criticism yesterday that they were hiring too many bankers and too few people with first-hand experience of social enterprise.
The comments came from social entrepreneurs invited to speak at a witness evidence session of the Adebowale Commission on Social Investment, a group set up last year to explore how the UK’s social investment market can help social enterprises to grow.
- Read: 'The voice of the customer is vital': Lord Victor Adebowale on his new Commission on Social Investment
June O’Sullivan, CEO of the UK’s largest childcare social enterprise, London Early Years Foundation, said she had “no intention of going near social investment” for the next phase of growth – partly because of a “lack of understanding” on social investment boards of running a social enterprise.
“If you were to do an analysis of who sits on the boards of social investment groups, companies, whatever – I’d say it’s pretty light on actual people who actually do the job [of running a social enterprise] and who have successfully done the job,” she said.
London Early Years Foundation has previously raised social investment from Big Issue Invest. Its turnover this year is expected to be around £25m, O’Sullivan said.
[Unlike] some fancy-pants banker... we bring lived experience and we can therefore advise - June O'Sullivan
Jerry During, founder of Money A&E, which provides money advice and educational services to disadvantaged and diverse ethnic groups, said social investors did “not necessarily understand” the business models of small organisations like his own. “Part of that is because of the mixture sometimes of the social groups and the people that are in these social investment organisations – they don't understand it and therefore feel more risk-averse when it comes to approaching some of the ideas that we have.”
Henri Baptiste, director of Pathways Housing Solutions, a housing provider for black and minority ethnic (BAME) communities, said the lack of understanding of financial markets within his own organisation was a “serious barrier” to raising social investment. But without support to bridge that gap, the current systems would “clearly favour” others that already had the expected skills and relationships, he said.
To help charities and social enterprises new to social investment, O’Sullivan proposed a programme that places experienced social entrepreneurs onto investor boards as non-executive directors. Those who had raised money and successfully delivered against it could be paid as NEDs – “not some fancy-pants banker, but us, who do the work… because we bring with it lived experience of having done it, and we can therefore advise.”
O’Sullivan continued: “We can therefore actually be given the credit, rather than other people who come in from a different background who get the credit for social investment, when actually it’s those of us who are delivering on the ground and paying it back.”
The business leaders also raised issues around gender and racial diversity. O’Sullivan said social investment generally was “heavy on men”, while Baptiste said the housing development and finance sectors were “essentially run by white-led organisations… there are very few BME officers at senior decision-making level or investment decision-making level.”
- Read: Just do something! How impact investors can move past silence and tokenism on racial injustice
Risk of ‘biased’ boards
In a second, separate witness session in which the commissioners heard from social investment bosses, Big Society Capital interim CEO Stephen Muers said the lack of diversity was a “totally fair challenge”. Data from last autumn had shown that the investment committees and boards that BSC works with were “not terrible, but not great” when it came to representation, with gaps in particular on ethnic minority representation.
Alastair Davis, CEO of Social Investment Scotland, said diversity was not such an issue in terms of gender, but admitted he had only “in the last couple of months” made it a policy to make sure that investment and credit committees were gender diverse; until then it would have been possible for committees to be all-male.
We have to find a way of bringing people onto committees, otherwise we’ll have very biased ones - Danyal Sattar
Danyal Sattar, director at Big Issue Invest, acknowledged he had both a “gender pay gap and a male-heavy organisation”, but said the harder thing to change was diversity within investment committees, which were usually filled by people with long years of experience in the same field. “We have to solve the problem of finding a way of bringing people onto committees, otherwise we’ll have very biased ones,” he said.
However, Muers said finding people with both frontline experience and the expertise to serve on an investment committee was easier than he had realised. Last year, Big Society Capital had advertised a role on its own investment committee and “found an incredibly strong field” of candidates with social sector experience, ultimately hiring “someone who’s brilliant”.
Davis said the majority of SIS’s investment managers – those dealing with enquiries particularly at the early stages – tended to be from a financial services and banking background. Despite recruiting “based on values”, such as the desire to have a positive social impact, the “risk aversion of some of my investment managers that’s been built up over many years of being in challenging roles within mainstream financial services, does creep into how they deal with some organisations that are by their very nature higher risk and not something you would even look at within a banking environment,” he said. “That’s something that I don't think I have the answer to.”
The risk aversion that’s been built up over many years in mainstream financial services does creep in - Alastair Davis
Davis agreed that there were “probably not enough people” with frontline experience among his organisation’s decision-makers. However, he pointed out that SIS Ventures, a subsidiary of Social Investment Scotland that makes equity investments, had invited Susan Aktamel, executive director of the social enterprise Homes for Good, to join its board, “for that very reason”.
The social investors also responded to questions on the cost of capital and the role of social investment compared to commercial finance, with Davis suggesting that social investors should make their “horrendously complicated” business models “really transparent”, so that outsiders understand better how their money is made and spent.
The Adebowale Commission, which is supported by Fusion21, was initially expected to present its recommendations last autumn, but has been delayed until this year. Further evidence sessions will take place in the coming weeks.
The commissioners are Jess Daggers, a researcher on impact investing and social investment; Jamie Broderick, former CEO of UBS Wealth Management UK and board member of the Impact Investing Institute; Susan Aktemel, executive director at Homes for Good; and Chris Murray, director of Core Cities Group and chair of Fusion21.
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