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
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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?
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My background: A “financial guy” seeking redemption (and fun) in social investment
financial sector and investment
social investment
2008
1999
1980
2008
1999
1980
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ii
ClearlySo: A social business & enterprise, commerce and investment marketplace
Suppliers Investors
Social Enterprises
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Social businesses and enterprises on the site
17% of businesses on site are non-UK based (as of Jan 2010)
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ClearlySo is expanding outside of the UK
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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)
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Catalyst Strategy Advisors
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So let’s look ahead at the outlook for social enterprise funding
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Changes to social enterprise funding: A Strategic View
• sources of funding
• types of instruments
• delivery mechanisms
• conditions
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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
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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”
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What do we mean by individual investors?
individuals
government
social businessesfinancial
institutions
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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
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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
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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
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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!!
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• 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!!
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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
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4. What sorts of conditions will pertain?
• Governance
• Transparency
• Clarity
• Professionalism
• “Pitching” ability
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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
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Thank you.Please feel free to get in touch!
Rodney Schwartz ([email protected])
Twitter: @rodneyschwartz
The Social Business Blog (www.clearlyso.com/sbblog)