west 100224 policy stuff v1
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The first marketplace for social business & enterprise, commerce and investment
Overcoming Barriers to Social Investment: Achieving the Highest Social and Financial
Gains—Investigating Current Policy Developments and the Future Policy Horizon
Rodney SchwartzCEO
Westminster Briefing24 February, 2010
Overcoming Barriers to Social Investment: Achieving the Highest Social and Financial
Gains—Investigating Current Policy Developments and the Future Policy Horizon
=What can Government do to accelerate the
Social Economy?
My background: A “financial guy” seeking redemption (and fun) in social investment
financial sector and investment
social investment
2008
1999
1980
2008
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ClearlySo: A social business & enterprise, commerce and investment marketplace
Suppliers Investors
Social Enterprises
Social businesses and enterprises on the site
17% of businesses on site are non-UK based (as of Jan 2010)
ClearlySo is expanding outside of the UK
Catalyst Fund Management & Research
• Raising £40 million from institutional investors in Europe to back high-quality social businesses focused on four sectors: Health & Wellness, Education & Training, Ethical Consumerism and Energy Efficiency
• Clear measurement of “social impact”
• Managed by team of professionals (not me, but I founded the business in 1997)
Catalyst Strategy Advisors
So let’s look ahead at the outlook for social enterprise funding
Changes to social enterprise funding: A Strategic View
• sources of funding
• types of instruments
• delivery mechanisms
• conditions
What is the background at present for
social enterprises?
• 62,000 SEs in the United Kingdom; growing fast as a sector in size and importance
• Very much the “flavour of the month”; popular with politicians across the political spectrum
• Largely government-backed; although foundations are increasingly involved
• Levels of funding have been microscopic to date
1. Future sources of social enterprise funding
• The Government is in a very tricky position:– It is in bad financial circumstances and in denial – However, it wants to and needs to shift
expenditure towards the social enterprise sector
• Financial institutions are unlikely to fund SEs:– Partly because they cannot and partly because
they will not– “Ethical” institutions may make up a small part of
the gap, but these are often Government funded
• Individual investors will be “the answer”
What do we mean by individual investors?
individuals
government
social businessesfinancial
institutions
2. What sorts of instruments will predominate?
• Grants — probably will decline in importance:– Govt problems and issues for foundations– The grant process is structurally challenged
• Loans — also an awkward form for SEs:– Many lack repayment or servicing ability– Traditional lenders are belatedly “gun-shy”
• Equity — an essential role to play• Hybrids — also will feature due to
increasingly complex needs and desires
The Case of HCT Group
• Background: HCT is a large and successful social enterprise operating community transport services in Hackney, Yorkshire and elsewhere. It was seeking to broaden its funding sources from sole reliance on lease finance
• We have been advising the company and in mid-February will close a round of debt and hybrids (quasi-equity) of £3-5 million, backed largely by ethical investors who see this as an emerging “benchmark” transaction
An aside on this issue of complexity
And let’s not pretend we understand what we mean when we discuss social impact
Risk
Return
Risk
Return
SocialImpact
3. How will the funds be delivered?
• Traditional intermediaries — I doubt it• Ethical financial institutions — Yes, but limited• Advisers — Absolutely; especially for HNWIs• Direct via introduction — most certainly
– Angel investment clubs– ClearlySo “Social Sector Speed Dating” (Epona)
• Direct via the internet — Absolutely!!
• Ethical financial institutions — Yes, but limited• Advisers — Absolutely; especially for HNWIs• Direct via introduction — most certainly
– Angel investment clubs– ClearlySo “Social Sector Speed Dating”
• Direct via the internet — Absolutely!!
Applying the lessons of Zopa.com and Justgiving.com to social investment
• Zopa does peer to peer lending and has enjoyed rapid growth since its inception
• Justgiving has facilitated over £500 million in charitable giving; over £189 million in 2009
• Many businesses are seeking to copy this success in social investing:– ClearlySo– MyC4– Mission investing
4. What sorts of conditions will pertain?
• Governance
• Transparency
• Clarity
• Professionalism
• “Pitching” ability
My personal journey: What can I do to make social entrepreneurs more successful?
• Be aware of limitations:– Environmental– Resources– Time– Talents (we all have some)
• Get started• Regular checks on how things are going
Thank you.Please feel free to get in touch!
Rodney Schwartz ([email protected])
Twitter: @rodneyschwartz
The Social Business Blog (www.clearlyso.com/sbblog)