Interview: Cliff Prior of Big Society Capital

Social Investment: the new opportunity agenda

Social investment – the use of finance to achieve returns which are wholly or partially social – is growing. According to a recent report social investment has doubled in the UK since 2011 and increased at a rate of over 20 per cent a year. By the end of 2015, UK social investments were estimated to be worth £1.5 billion with over 3,000 organizations benefitting from them. How much further can it grow? Are there any downsides? Some fear social investment is a stealthy takeover of the social sector by the market. What is its relationship with traditional philanthropy – ally or competitor? Cliff Prior is the newly appointed CEO of Big Society Capital (BSC), the organization set up to develop the social investment market in the UK. Charles Keidan asked him about his new job.

Congratulations on your appointment. You previously worked for Rethink, the mental health charity and then moved to UnLtd, so this is quite a transition.
Each of my three CEO roles has been very different. I just spent nine or so years working with social entrepreneurs at UnLtd which was a joy partly because social entrepreneurs are absolutely full of optimism and ambition to improve the world and partly because it’s my background. I’ve been involved in social ventures since I was 19. So I’ve worked in a lot of different fields – mental health, social housing, community care, offender resettlement, learning disabilities, crisis intervention, counselling troubled young people – but all with the defining common theme of opening up opportunities for people. My new role is more institutional. Social investment, when it’s working, opens up the opportunities for charities and social enterprises to be at their best and achieve more.

Is there another defining theme of social justice underlying these things?
Yes though I think my way of coming at it is more about enabling opportunity. Social entrepreneurs tend to come from much more disadvantaged backgrounds and it’s a way in which they can demonstrate their talents, strengthen themselves and become stronger leaders for social missions.

What attracted you to work for BSC?
After working with start-up social entrepreneurs, it is quite a logical next step along the journey for social organizations that are ready to expand their ambition and take a step up using social investment. It’s an exciting challenge because I think social investment has sorted out the teething troubles of how you put the investment mechanisms together and it’s now at the point where you’ve got a machine you can use if you understand the social sector. I couldn’t have done what Nick O’Donohoe did in setting up that machine but I think what I can offer is not just the tangible steps that a charity or a social enterprise would use to take such an investment but what it feels like to live your life running a charity or social enterprise, the trials and tribulations, and the breakthroughs and successes.

Could you just say a few words about what BSC was originally set up to do?
It came out of a move to use money in dormant bank accounts to build a pool for social investment. £400m came from dormant accounts and another £200 million came from the Merlin deal, a deal with the banks following the 2008 crisis.

‘What Big Society Capital does is make sure that charities and social enterprises can get the repayable money that they need to do more of their work.’

What Big Society Capital does is make sure that charities and social enterprises can get the repayable money that they need to do more of their work. It’s got two functions. One is as a wholesale investor: getting money into other intermediaries which then do the direct social investment. The second is as market champion: is the regulation right? Are there the right tax breaks? Is there public understanding? And so on. It’s very much a model about crowding in and getting other investors involved rather than taking a sizeable pot of money which could crowd out other players.

So as a wholesale investor, BSC invests in intermediaries that can then go on to invest in charities and social enterprise based on your assessment of their ability to use those finances effectively?
Yes, and the intermediaries are very different. Specialists in social property, specialists in start-ups, specialists in small loans for working capital. Some operate in really interesting niches, for example, a facility for direct payments and personal budgets for people with disabilities, to make them more liquid. There are 30-plus intermediaries at the moment.

Why doesn’t BSC invest in charities and social enterprises directly?
When it was being set up, there was a strong view that we already had a number of social investors, and if you were to take £600 million and plonk that into the sector, it could have easily crowded out any other opportunity. There was a very strong push for Big Society Capital to be designed in a way that was wholesale rather than retail.

How does BSC’s structure and funding relate to its governance?
There is a Dormant Account Act which lays down some primary legislation. We then have a shareholder body called Big Society Trust. The trust has one government representative, one from the banks and the rest are from the social and investment sectors. The shareholder body owns the working capital not just of Big Society Capital but also of Access, a new organisation set up to provide capital to smaller and earlier stage organizations.

‘What we need now is more the engineering than the philosophy.’

Talking about social investment more generally how do you approach, for instance, the measurement of impact?
If you’re a social organization, it’s very important that you can demonstrate not just the social benefits that you’re creating, but your whole social impact. In practice it has proved incredibly complex and burdensome to do that but we’ve now got a number of national and international standards. I think it’s probably time that we put more effort into the mechanics of how you collect, aggregate and share your data. Organizations need to have the practical means to do that at a reasonable cost and with a reasonable level of detail and comparability. One of the models I like is impact audit. You decide what your impacts are, you measure them, you produce those results, and just as with your finances, somebody external comes in to verify your methodology and your numbers. What we need now is more the engineering than the philosophy.

Are there examples of organizations that you think have measured their particularly well?
There are, but I think it’s still work in progress. The people who do it best are the people who can actually use their impact measure as part of their business model, so it’s a help, not a hindrance. Oomph is a social enterprise which provides wellness and fitness classes for older people in care homes which very quickly identified that one of the benefits of its work was a reduction in falls. This was really important to the care homes because of their residents getting hurt  and also because it’s expensive for their business, too – it creates lots of bureaucracy, safety reporting and so on. So Oomph turned its impact measure of reducing falls into a widget that could go on the website of the care homes that simply says ‘no falls in this care home since whenever’. So while most social organizations recognize that measurement is important, they also say it can be burdensome and slow, Oomph has turned measurement into an advantage. That was the recommendation of the G8 task force working report on social impact investment – if at all possible, make it into an advantage.

Oomph! run exercise classes in care homes and the community to improve older people’s health and well-being.

Oomph! run exercise classes in care homes and the community to improve older people’s health and well-being.


Caroline Fiennes and Ken Berger argued in a recent piece for Alliance that if you want reliable data you need external bodies measuring impact. What’s your view?
If you want externally reliable data then that’s probably true but there’s an internal element to this too. For many social organizations, collecting your outcome and impact data is in large part about how you improve your service so of course you do it. At UnLtd, we were constantly looking for better ways to understand the intervention that we gave to the social entrepreneurs. If we didn’t have the data, then we couldn’t choose which were the best methods. Of course, none of this is perfect. If we aimed for perfection, it would cost more to do the impact measurement than to create the impact. You’ve got to get a realistic balance but I think a model like impact audit is both practical and credible.

And who should do the impact audits?
I think we probably need to test that out. Are there already people who do audits of different kinds – regulatory audits or financial audits – which could be adapted? Or do you need to create new organizations? You could have specialist providers or it could be a specialism within other organizations.

There is one other thing that’s missing in the current debate. All the focus on intended impact can distract from all sorts of mayhem that can occur in the background that wasn’t your intention. That’s one of the reasons why I like systems like B Corps because their analytics force you to consider not just your intended impact but also things across the board like how you are treating your staff and your supply chain.

At Big Society Capital, we have our own social impact matrix and there’s now quite a lot of clamour for us to convert that into more tangible mechanisms. We also have more to do on our own impact both on the championing role and on the investments.

We’ve also introduced a project to improve transparency. From a potential investee point of view, social investors are very opaque at the moment. What have they actually done and do they invest in people like me? It’s quite hard to find your way around. This is being coupled with a new website called Good Finance. Good Finance is a collaborative effort to make it easier for social sector organizations to find the right social investor or even to find that social investment isn’t the thing for them.

It’s a popular view that the UK has led the social investment market. Do you share that view?
I’ve been involved at UnLtd with the Global Social Entrepreneurship Network which is across 50 countries. I don’t think the UK is better at everything but rather that it probably has the most rounded ecosystem – from start-up support, to investment, to talent, to regulation, to tax breaks and, very importantly, popular culture as well. I think the UK’s ecosystem is unique and that’s probably where we shine.

What do you mean by the popular culture element?
The British public are very interested in the social economy generally. Although social investment isn’t top of their list of awareness and understanding, it’s still pretty good compared to the majority of countries. There have been recent surveys of the public – would you put part of your savings or investment or pension into a social product? These have shown strong interest.

Does the sector have a degree of trust and enthusiasm that maybe has been missing at times from the wider charity sector?
It’s early days so I think it’s more excitement and interest. The majority of people haven’t done it yet whereas most will have been directly involved in donating or volunteering. Part of our strategy for the future is to tap into that interest: how can we create mechanisms which make it easier and realistic for the public to engage in social investment? Is there a return? What’s the level of risk? Can they choose who they’re investing in or is it something they want to do on a more institutional basis? That’s really exciting.

‘In terms of engaging the public in social investment, the global standout is France.’

We’ve got a crowdfunding challenge out at the moment, and I think that will test the UK’s level of interest and how it might work. In terms of engaging the public in social investment, the global standout is France. Their success in getting over a million people now into the ’90-10′ savings and pensions system is remarkable. That’s a more institutional approach and it might be that the UK works like that, or it might be a more peer-to-peer kind of arrangement. But it’s a really exciting thing to do. It brings in more investment, it brings in probably different kinds of investments with different attitudes and expectations. But more than that, it becomes a movement instead of a set of institutions. Movements have their own energy so you don’t have to keep pushing it. Once it starts, it goes.

What would a social investment movement look like? What kind of numbers involved and what sort of activities?
If we achieved the numbers of the French scheme, we’d be very happy, but maybe it would go even beyond that. Many of the people who volunteer in the UK actively seek out volunteering opportunities. The impetus is from the public, and that makes it much more dynamic, much more creative and that’s a really good place to be. Take the Freedom Bakery for example – it’s a bakery in a prison which trains offenders in skills that they can use in employment when they finish their term. To expand, they’ve started taking investment from individuals using the new social investment tax relief. It’s a very small example but this is from individuals putting personal money into social investment aided by a government tax break, and enhancing a social benefit.

Freedom Bakery 1

The Freedom Bakery raised investment from individuals using the Social Investment Tax Relief.


You mention government and you mentioned tax regulations. How important are these in creating the environment in which social investment can happen?
Over the last several years, we’ve had long-term, consistent, support to social enterprise and social investment across changes of governing party. And with that has come new sources of money like Big Society Capital, regulatory approvals, for example with the Community Interest Company structure and then, when it was apparent that the structure wasn’t quite right, freeing that up. We’ve got social investment tax relief, one thing after another. It’s been quite enabling.

Another way of producing social benefit is divestment – divesting or encouraging divestment, for example, from fossil fuel companies or other sectors. Is this the flip side of social investment and to what extent is it in danger of being undermined by social investment?
It’s a different job but I think it’s a really important thing to do and something Big Society Capital has already encountered. We have recently switched our treasury portfolio and gone with a more pro-social mandate to an investment company which previously had not offered socially responsible investments to make them do it for the first time.

Do you think we are going to see more institutions doing similar things not just for a portion of their investments but across the board?
I think it’s important but we have to be aware that many things that looked good in the past turned out to be bad and actually some things that we thought were bad have turned out to be good. We have to be humble about our judgements. We won’t always get them right.

It’s interesting to hear you talk about consistent support across governments of different political complexions. One criticism of social investment is that it increases the influence of the market and market forces over social outcomes. How do you view that?
There’s a spectrum: from socially minded investors investing solely in regulated social organizations at one end right the way through a middle ground to the other extreme of impact investing where commercial investors are putting money into the achievement of impact through any organization. Our mandate is that the end investments go into organizations which are wholly or mainly for social benefit. This places us near the purely social end but I think all of it is valuable. We need massive investment in renewables, for example, and without big institutional finance, it’s probably not going to be feasible. On the other hand for, say, a small organization supporting people with learning disabilities, perhaps it’s more useful that somebody who is passionate about it and really understands the work is the investor. Different things apply for different circumstances. I think there’s some confusion because at the moment, social investment doesn’t distinguish between kinds of investment. The commercial investment sector has names for investment in a listed stock exchange or private equity or any one of a whole number of different sectors. Perhaps the social investment/impact investment field needs to have more specific labels so people understand what it is that’s being talked about.

‘Perhaps the social investment/impact investment field needs to have more specific labels so people understand what it is that’s being talked about.’

I think the sector is going to see both standardization and specialization. Some of the things that are very common such as investment into assets for charities and social enterprises are likely to become very standardized. This will make it cheaper, less complex and less scary for the trustees of those charities. They are more likely to say yes because they’re using a form of contract that thousands of others have used. By the same token, we’ll discover other possible, more specialized uses of social investment where specialist organizations will be needed as the intermediaries. In both cases, naming what you’re doing properly will be really useful.

Do you think there’s some way to go?
When I was at UnLtd and we were seeking advice about the branding of social entrepreneurship, one of the things the experts said to us was ‘it’s like you’ve only got one name for “shop”, so you might go out for shoes and end up in a grocers. You need some more names for these things.’ But as with any new part of society, it starts off quite generalist and becomes more specific over time.

The broad governmental support social investment has enjoyed suggests that it’s not seen as either right or left wing in its orientation. Is that how you see it?
I’ve been harangued by people from both extremes in the past. But I think there’s a strong central view that social investment is a useful tool, along with other tools, for achieving social benefits.

Social investment seems far removed from traditional conceptions of philanthropy and grantmaking. How do you see the relationship between philanthropy and social investment?
First, I think without philanthropy it’s very difficult to do social investment. There are many areas in which foundations are the sole suppliers of revenue finance for social benefit. There are some areas where governments are not interested and not prepared to pay. We’re very lucky to have foundations in the UK that occupy very specialist niches and will take on some of those very complex issues.

Second, and more directly connected to social investment is venture philanthropy, an area where the UK is relatively weak. It’s important because it’s very difficult for a charity or a social enterprise to get to the point where it’s credible and able to take a social investment without venture philanthropy. When I look at other countries, often venture philanthropy is stronger than social investment. Here, it’s the other way round, and that’s a gap.

We’ve had some organizations that are standouts on this. For example, Impetus PEF [the Private Equity Foundation] and the Esmee Fairbairn Foundation use philanthropy to invest in organizations, charities and social enterprises and getting them to the point where they can then take social investment to expand further. We’ve now got blended finance initiatives like Access which is part venture philanthropy and part investor and that looks really promising. So I think that philanthropy is an absolute bedrock.

So from your point of view, social investment doesn’t mean the end of philanthropy?
My longer-term ambition for social investment is that it comes to be seen as a useful, well-understood, easily accessible tool, alongside other tools, like trading and fundraising for charities. More immediately, the three things for me are that we need to start from the social issue and the social organizations tackling it and work up rather than starting with preset investment products. There are already some great examples. We’re working at the moment in the homelessness sector. The more that work is owned and led by the charities and social enterprises in the sector, the more confident they are about when and how to use such an investment. The second thing is the greater public engagement in social investment that we’ve talked about. And the third is a shift in the tone. We’re now at the point in the UK where most charities and social enterprises know that social investment exists. What they now need is an understanding of how you would judge whether it’s right for you and, if it is, how to go about it. So in our market championing role, we’re moving from simply making people aware to working on the detailed understanding.

As time goes on, more and more organizations will have had social investment. You will be able to go and ask somebody who’s done it. Over 3,000 charities and social enterprises in the UK have taken social investment. That’s a pretty big baseline to work on.

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