'Governments have done what they can, charities have done what they can. Now it's the turn of social investment and social entrepreneurs.'
Sir Ronald Cohen has just been on the Today programme, talking about the launch of Big Society Capital, which will use £600m to fund social investment. He spoke about why it was important to kick-start funding of social enterprises, which will in time provide both social and financial returns – the double-bottom line.
Big Society Capital is key because 'we are the market-builder' in supporting social enterprises. 'We will be trying to develop a whole host of social invest propositions like venture capital firms.' As the chief developer of venture capital in Britain, his words need to be taken seriously.
His main point, which is not comfortable for everyone to hear, was: 'We are at a watershed. We cannot ignore social issues any more. Governments have done what they can, charities have done what they can. Now it's the turn of social investment and social entrepreneurs.'
This apparent diminution of charities (of course, nothing of the sort) had already been challenged on Today by Dan Corry, CEO of New Philanthropy Capital, who took a rather narrow view, saying that Big Society Capital wasn't going to help charities at all. He missed the rather significant point that it's not meant to – this is a third field. (His view here is a little modified but not exactly an endorsement.)
This is what people find difficult about social investment, as I have written previously and as was pointed out at our philanthropy seminar: making a financial return alongside a social return seems wrong to some people – almost uncharitable. Investors can feel awkward, as if they're profiting from distress, when the opposite is true: the government is paying the most successful social entreprises because they are reducing the effects and the costs of social problems better than it can.
The Today programme is not the ideal place for such analysis – it works in binaries, and Sarah Montague's questions were typical. When she asked about 'competing' with other investment opportunities which would give a financial return, Sir Ronald pointed out 'there's a whole spectrum of returns that's possible – venture funds that compete fully but lots of other organisations that can only achieve a modest return. The important thing is that there are pools of capital that are prepared to accept social and financial returns.'
The spectrum argument is key, and is also what is so hard to convey – social investment is not an either/or but a both/and, just in varying proportions. It is subtle.
Sir Ronald also said that there were more complex business models: 'There are a range of financial instruments you can use to give an incentive to a social organisation to achieve a social performance and give a financial return to an investor.'
Sarah Montague asked him about the scale and ambition for social investment: 'It is enormous but I believe it's real. If you look at what business entrepreneurs have been able to achieve over the past 30 years, it seemed exactly the assume at that time. It was almost impossible to think that Britons would become business entrepreneurs.'
No-one now thinks Britons aren't suited to traditional enterprise, and there's no reason to think that we won't use Big Society Capital to make big social and financial successes.