from social investment to social return on investment

a social enterprise????

I recently attended the inaugural ”Social Return Forum” put together by a colleague of mine, Oliver Wagg  of New Climate for the 3 Pillars Network.

Concepts like social investment, social return on investment and a social investment market are much talked about lately by social investors, social entrepreneurs, those generating social profits and intermediaries alike and seem to have gone mainstream – and for good reasons:

  • We all want and need to know if our efforts are making a difference to the issues we are trying to address.
  • This evidence base to inform further investment has been missing in large parts of the social sector.
  • Evidence of social returns is instrumental for those investing funds in social issues and who are convincing others of the merit of these investment.

To state the obvious and track back a little – we are hungry for alternative approaches to welfare funding and need evidence about whether approaches work or not.Anecdotes simply don’t do the trick anymore, the problems are too persistent and large in scale to be ignored. In the past, millions of government, philanthropic and corporate dollars were invested in public programmes aimed at improving the livelihood of marginalised people, young and old.

Instead of helping people to find ways to create wealth we have compensated people for being poor. Funds poured into the poorest areas have lead to physical improvements but haven’t lifted communities out of poverty.

The social investment taskforce in the UK has found in 2000 already that for communities to thrive, it needs individuals seeking to create wealth and investors seeking to generate a financial and social return. Poor communities tend not to have enough of either and that’s why they are best described as underinvested communities, rather than poor communities.

(Just like non-profits, aka non-government organizations should be described as social profit organizations to focus them on what they do rather than what they don’t do: generate social profit which can be measured.)

“charities and poverty … Currently it is charitable to help people who are poor. However, if you want to help them out of poverty through enterprise, the odds are stacked against you. So, charity ends up helping the poor, so long as they stay poor. “It is time to change the rules.” (quote from UK social investment task force 2000)

10 years later, the taskforce concluded its work with a final report reviewing achievements of the past 10 years and making policy recommendations for the future, most notably three  key recommendations:

  • Establishing the infrastructure necessary to create a dynamic market in social investment through initiatives such as the Social Investment Bank;
  • Creating new tools to deliver social change through financial instruments such as the Social Impact Bond; and
  • Engaging the financial sector to invest in disadvantaged areas through a Community Reinvestment Act.

Closer to home the Federal Government has responded to the need for an social investment market through the establishment of The Social Enterprise Development and Investment Fund (SEDIF) and discovered that: “The social enterprise sector is an emerging one in Australia. International experience has demonstrated that it is an innovative and effective means of addressing social challenges in a sustainable way. The Social Enterprise Development and Investment Fund (SEDIF) is a  $20 million specialised investment fund providing financial products and encouraging capacity building for social enterprises in Australia. It will be used to leverage matched funding from the private and philanthropic sectors to enable new systems, achieve greater impact and innovation in service delivery to support highly disadvantaged Australians.”

The Government is consulting with the sector until 3 December 2010 inclusive, if you would like to participate click here and help shape the future of the social investment market.

Another driving factor for the increased interest in social return on investment is the growth of corporate social responsibility. As the corporate sector grapples with its  own social impact, the need for effective partners has risen. Social profit organisations have also increasingly recognised the corporate sector as an enabler to achieve rapid social change. The boundaries between the social and the business sectors are blurring more and more.

Is all this talk about social investment and return on investment just a fad or could it be the panacea for a long standing challenge: how to measure the actual long-term impact of investment in social issues?

Where to from here?

  • We do need to be careful not to be over-enthusiastic and need to clarify what exactly we mean by social investment, social enterprise and return on investment, in other words: think and develop sound policy before we jump!
  • We need to create an environment that fosters the development of a social investment market with supply and demand – not one or two players but an entire ecosystem;
  • We definitely need to catch up with international developments in this space and support the early adopters and innovators.

What’s not to like?

For more information you can start here:

To find out more about the forum organisers visit:

To find out more about Oliver Wagg and New Climate: or to download the background paper profiling different perspectives of key players he put together click here. The paper deals with issues like SROI; offers examples of social enterprises in action including the recently much publicised GoodStart Childcare Centres; ‘social impact investing’ which offers alignment between mission of organisations and investment strategies and more.

To find out more about SROI: