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Impact investment: the golden nugget – or the copper coin?


28 February 2022 at 6:22 pm
Andrew Curtis
The findings from the UK’s latest review into the state of the social investment market should be a warning to the emerging social investment sector here and is an opportunity for the Australian social sector not to make the same mistakes, writes Andrew Curtis.


Andrew Curtis | 28 February 2022 at 6:22 pm


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Impact investment: the golden nugget – or the copper coin?
28 February 2022 at 6:22 pm

The findings from the UK’s latest review into the state of the social investment market should be a warning to the emerging social investment sector here and is an opportunity for the Australian social sector not to make the same mistakes, writes Andrew Curtis.

Predictions for 2022: Impact investing, published in Pro Bono News in January, stated “nowadays, hardly a week goes by without the announcement of someone new establishing an impact investing fund or strategy”. 

The same article positively identified the “tremendous need – and opportunity – for government to partner with the private and for-purpose sectors to leverage impact investments and fundamentally shift the dial on persistent disadvantage”.

Reference was made to the Social Impact Investing Taskforce set up by the federal government in 2019 and its six key recommendations that “can help us develop a mature, efficient and effective impact investing market in Australia”. 

These recommendations drew heavily on the history of the impact investment market in the UK, suggesting Australia could learn much from its development since 2007, including Big Society Capital and the Tory government’s use of investment funding (debt finance) as a way to defeat the embedded structural inequality and poverty that exists in the UK.

But the Commission on Social Investment, an independent group set up by Lord Victor Adebowale (who is also the chair of Social Enterprise UK) to investigate the current state of the social/impact investment market in the UK, arrives at some alternative learning from which the entire impact investment industry in Australia might also learn.

With input from representatives from the social impact investment, academic and social enterprise sectors, the findings are a reality check for those who wish to emulate the UK experience. 

Here is a summary of the key findings:

  • The commission’s final report has called for “comprehensive structural reform” to the entire social investment market in the UK.
  • The commission has found that after £600 million of public investment since 2010, the market is “fundamentally the same in 2019 as it was in 2011”.
  • Social enterprises in the regions and nations of the United Kingdom have been underserved by social investment as well as disadvantaged groups, such as Black-led social enterprises. In particular, the commission found that “social investment continues to have a serious problem with inclusion and equity particularly, although not exclusively, in relation to race.”
  • The commission found that the structure of the social investment market was at the root of these problems, particularly the lack of patient, concessionary capital for on lending to social enterprises and the lack of flexibility in the structure of key institutions within the social investment market, such as Big Society Capital.
  • These structural weaknesses have led to a lack of diversity in the financial products available to social enterprises, particularly a lack of “enterprise-centric finance”, which the commission has defined as investment which is built around the needs of social enterprises with flexible repayment terms rather than conventional debt products.
  • It concludes that “the needs of social enterprises have been deprioritised over the past decade” and that “social investment cannot work – and has no purpose – without social enterprise.” 

The commission also made several recommendations from which we might learn:

  1. Government should develop a new UK-wide social investment strategy, to provide renewed clarity and purpose to the social investment market.
  2. A new £400 million Frontiers Fund should be given to a reformed Big Society Capital, which should have its financial sustainability target removed, to provide enterprise-centric finance to social enterprises. 
  3. A new £50 million “Black-led” social investment fund should be launched to tackle the current inequality of social investment in Black-led social enterprises.
  4. There should be regular investment in place-led social enterprise infrastructure to support the growth and development of social enterprises that can access social investment. 
  5. There should be a new “Social Enterprise Loan Guarantee” scheme to provide security to investors in long-term patient capital for social enterprises backed with £200 million of public money.
  6. There should be a new “Flexible Capital Taskforce” to work with charitable foundations to boost their investment in social enterprises and unlock £380 million of new capital by 2030.

It appears plausible to conclude there are real lessons to be learnt from the UK that suggest impact investment may not be the golden nugget that solves social challenges in the way it often promotes itself. 

At its worst, it may only benefit the already wealthy established few and by-pass the many resource poor communities where social change is most needed. 


Andrew Curtis  |  @ProBonoNews

Dr Andrew Curtis is the co-founder and director of The Dragonfly Collective.

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