Social investment comes to the G8

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Steve Goldberg, US Independent
Social Investment Adviser

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These are heady days for impact investing, and the Prime Minster’s call for a G8 Social Impact Investment Forum on 6th June promises to be a watershed event.  Three emerging trends herald an auspicious occasion.

First, innovative solutions to seemingly intractable social problems developed in one country are being exported to others, accelerating the prospects for wider adoption.  For example, after some three decades of painstaking testing, refinement and validation in the U.S., Multi-Systemic Therapy and the Nurse-Family Partnership still reach less than 5% of the at-risk children and first-time mothers whose lives they can transform.  In June, 2011, the report of the Early Intervention Review Team led by Graham Allen MP showcased both prevention programs, attracting the support of Big Issue Invest, NESTA, Impetus Trust, Big Society Capital, Social Finance Ltd., the Bridges Social Entrepreneurs Fund, and other impact investing pioneers.  These exemplary “evidence-based practices” could well span the UK in less than a decade. 

Similarly, just four months after Essex County Council announced the first Social Impact Bond to improve outcomes for vulnerable young people on the edge of care, the Treasurer of New South Wales signed Australia’s first Social Benefit Bond to help children already placed in care to return safely to their families.  And City Year, born in Boston (Massachusetts, not Lincolnshire) in 1988, and now deploying 2,500 full-time volunteers to enhance educational attainment in 238 U.S. schools, arrived in Birmingham (England, not Alabama) in 2010 with a big boost from Credit Suisse and a Big Society Award from No. 10.

Second, innovative financial instruments and structures are cross-pollenating internationally.  What began as microcredit in Bangladesh in the 1970s has become a flourishing “financial inclusion” industry offering savings, insurance and fund transfers to more than 130 million of the world’s poorest people.  Three decades later, it’s easy to lose count of the number of countries embracing the UK’s Social Impact Bond model (welcome aboard, Social Finance Israel) to make public service delivery both more effective and less costly.  President Obama has proposed a SIB incentive fund in the Treasury Department modeled after the Cabinet Office’s Social Outcomes Fund, while Impetus has studied the White House’s Social Innovation Fund as a guide for “scaling what works.”  Not long after the Omidyar Network brought its market-based, “philanthropic investment” approach to London, the respected specialist fund manager Bridges Ventures, which recently announced the first SIB Fund, is standing up a US operation.  

Third, an international impact investing marketplace is organizing to attract, deploy and manage billions of pounds, well beyond what any country could do alone.  Led by Minister for Civil Society Nick Hurd and the Cabinet Office’s Social Investment Team, and with the collaboration of too many distinguished non-governmental partners to name, the U.K. is developing a “global hub” of intermediaries, advisors, fund managers, analysts, and exchanges with the horsepower to connect the worldwide supply of and demand for social investment capital.  Complementary efforts of the Euclid Network, the European and Asian Venture Philanthropy Associations, the Nexii capital marketplace in South Africa, the Canadian Task Force on Social Finance, Bertelsmann Stiftung’s work in Germany with New Philanthropy Capital, and the New South Wales Treasury’s work on Social Benefit Bonds are all keen to be joined up on a global platform.

These coordinated developments in social innovation, impact investment and collaborative market institutions reinforce longstanding efforts by Sir Ronald Cohen, Michael Porter and many others to reinvigorate capitalism itself.  This is a timely conversation worthy of the G8’s consideration.