The Big Society Bank has been 'launched' - but what are we still waiting to know?

After a gestation period of more than a decade, the Cabinet Office recently announced that the Big Society Bank - recently rechristened Big Society Capital – had been ‘launched’ .

It would be fair to say that this launch was a media-focused announcement rather than an actual opening for business. EU and FSA approvals are still pending, and the Bank’s holding website itself states: “Big Society Capital is currently in the process of being set up and is not yet open for business”. The major component of the announcement was the unveiling of Big Society Capital’s board of directors and board of trustees – whose membership focuses on various City and Social Finance grandees and a couple of SocEnt and third sector trade-bodies. In June, prior to this announcement, an interim Big Lottery Fund-run £5m ‘Big Society Investment Fund’ had been established, and the recent ‘good and the great’ announcement was topped up by the heralding of a £1m investment in the Private Equity Foundation’s work on NEETs through this interim arrangement.

It’s likely that this buzz of activity will continue over the coming months as the government seeks to bolster the wider ‘big society programme’ by playing up its most solid component. However, underneath this, the answers to a range of key questions remain unclear, and so therefore does assessment of whether Big Society Capital will fulfill its huge potential.

It remains unclear how much money the Bank will eventually have available to it, and the scale of this is obviously crucial in determining its eventual impact. Estimates of the amount of ‘unclaimed assets’ vary but have stretched into the billions. Current estimates sit around £400 million. In addition to this, approximately £200 million will be available to the Bank through Project Merlin, the agreement between the Government and Britain’s major high street banks that followed the bank bailouts of 2007-2008.

Another key key question is the cost of finance. The Project Merlin banks have talked about the £200m being available at commercial interest rates, which would simply duplicate finance that is already available to social enterprise (but too expensive) and go against the whole concept Cohen (who understands this) has been trying to put together.

Scope is another key issue that has yet to be ironed out. Within what geographical reach will its capital be allowed to be deployed, and how will that be policed? For example, what about a solar lighting company (social benefit) that has its operational base in the UK (geographical fit) but manufactures in China and sells in Africa? Does that put it in or out of scope? What sectors will be allowed? How will social impact be measured / distinguished? What prevents a conventional business (such as Unilever or Pepisco) from applying and claiming a social benefit? Will it only be available to organisations with certain types of legal structures, e.g. CICs or Co-ops? What about charities? Or businesses with an embedded social purpose?

A further question is how long it will take the social investment sector to adapt. The Big Society Investment Fund calls for proposals from investment intermediaries who are based in the UK and focused upon England. Assuming that the Bank will take a similar scope, it would be fair to say that there are not many of these currently in existence - Bridges Ventures, Unltd, Venturesome, and new entrants like Merism Capital come to mind. How many will be needed to make this work? How long will it take to create them?

Beyond that, if the funds need to find a home within the SE sector itself, the scale of recent investment does not suggest this will be easy to do. Investments like HCT’s £3m ‘social loan’ to and Cool2Care’s £500k investment from a consortium of Big Issue Invest, Venturesome and CAN Breakthrough are news in the sector because they are - for social enterprise - big and rare. This suggests £600m will be very hard to deploy within the sector without investment in significant capacity building to both expand the sector and to improve investment readiness. While May’s interim proposal for the Big Society Bank did recognise this, it remains to be seen how the institution - which is seemingly being set up to run as a wholesale investment bank - will be able to rise to this challenge.

Introducing iX

By Stephanie Denamps

With the expansion of the social enterprise sector comes the need for social finance: designated capital that is earmarked for particular projects where the financial returns must be measured alongside the social benefit. This capital needs to be patient (returns will be made in the long term), flexible and innovative (returns are hard to grasp and measure) and most probably has to accept below commercial rates of return. Fortunately, such pools of capital are already coming together and the interest they get is on the rise. There are social business angel networks connecting high net worth individuals and other philanthropists with flourishing social enterprises (ClearlySo being the largest one in Europe). There are intermediary social finance funds such as Bridges Ventures, UnLtd and Venturesome that lend money to social enterprises expecting a long-term financial return. The Big Society Bank (or Big Society Capital, as it’s now called) will gather funds from dormant bank accounts to fuel these intermediaries and ultimately to spur social business activity. Loans and social impact bonds are the most common instruments so far, but the sector is relentlessly on the lookout for the next financial product that can align social and financial returns.

Alongside all that, there has been a related initiative taking place at a larger scale: a worldwide social impact stock exchange. The iX is in fact the first Impact Investment Exchange Board, developed and launched in collaboration with the Stock Exchange of Mauritius (SEM). A couple of weeks ago, some of the On Purpose Associates attended an event, organized by the ICAEW (Institute of Chartered Accountants in England and Wales) and hosted by Nexii, to introduce the founders of the first approved and regulated stock exchange dedicated to social enterprises. During the presentation we learned about the key benefits of this platform. For the social enterprises that get listed, it brings great visibility, credibility and access to new sources of capital. For social investors, it’s a visible, accessible and trusted pool of social enterprises. To both sides it guarantees the time and cost efficiency of an organised exchange. The Mauritius stock exchange itself is recognised by its good international standards and regulations, advantageous listing fees and absence of tax on capital gains and dividends. Multi-currency trading (Euros, British Pounds and US Dollars) also means that currency risk is reduced. Finally, this project nicely fits the sustainability aims of the island.

Without questioning the need for and the merit of this initiative, it’s worth highlighting a few concerns that arose as the presentation unfolded and the audience raised questions.

Size: The projections so far are to have 15 listings by the time it launches in September 2011 and up to 35 within 18 months. This is really a drop in the ocean when we think of the number of social enterprises aspiring to grow and needing access to dedicated capital. The truth is that the entry requirements are prohibitive for smaller organisations. There is a US$3700 entry fee plus an annual fee varying with the size of market capitalisation. To be eligible, the organisations must have a least one year of published financial statements, over 100 shareholders or over 10% of public debt holders. Most importantly, they must have over US$700 thousand of capitalised market value (or public debt).

Social Impact: Although a condition for entry (and yearly renewal) is primacy of the intent to generate positive social or environmental impact, each organisation is free to demonstrate its mission and impact as it chooses. There are no standardised metrics of social impact or common indicators that gets reflected live for all enterprises at it does for the share price. Instead, once they are listed all organisations become comparable mainly by their financial attractiveness, and the impact side of things runs the risk of falling behind the scenes. Admittedly, reflecting live social impact in a stock exchange way would be very difficult. It is not even granted that all organisations could convey the impact they generate using the same metrics. Therefore, it will rely on the investors to do the proper background check and reading the lengthier reports that the enterprises are required to submit at the time of their listing and the subsequent performance reports. This is not unrealistic, but one must be aware that this is how it works and not expect otherwise.

Other similar platforms: There are other trading marketplaces being developed to bring investors and enterprises together effectively and reduce transaction costs for impact investing. Some people may have heard of Pradeep Jethi’s Social Stock Exchange (SSE) to be launched in the UK, and there are already an Asian Impact Investment Exchange (IIX) founded in 2009, which will eventually seek to attract dual listings from social enterprises outside Asia, and Brazilian and Portuguese initiatives. Although they may all be addressing the same issue and appear to be redundant, there is an argument for the need of multiple social stock exchanges. Just as for the traditional securities market, most social enterprises and investors will likely prefer to engage in platforms that are in their proximity, both geographically and culturally. Therefore, each social stock exchange will be stimulating their regional activity to start with.

The iX may not be perfect as it stands and it may not be the solution that fits all social enterprises or all groups trying to support them, but it is A solution. It certainly has room to exist and a role to play in the promotion and aggregation of social enterprises. It’s still in its nascent phase and needs to be seen as a long-term project, as most things are in this sector. We need to adopt the patient approach if we want to ensure a sustainable growth of social businesses and social investment, and we must absolutely not succumb to the preference for perfection, speed, volume or short-term gains. Who knows, in the future this may be the alternative to the current financial system and its unruly market crises.

Finding Inspiration at Embercombe

This past weekend Tom and the Associates ventured to Embercombe, a social enterprise and valley in Devon that inspires individuals to take action to help build a socially just and environmentally sustainable world.

The weekend served as a pause for reflection as we begin our second placement of the year. In a few short days we experienced firsthand what sustainable living can look and feel like, and through conversations and individual self-exploration we discovered more about who we want to be as individuals and how we want to contribute toward shaping our future world.

At least a few of us were skeptical of what we assumed would be a weekend filled with trust falls and similar ‘team building’ exercises. Instead we found rejuvenation and renewed motivation through activities like woodworking, gardening, campfire story-telling (and rapping!), people planting (a bit hard to explain…), even playing on swings and monkey bars. Oh and do remember to ask when you next see one of us how to play ‘Zip, Zap, Boing.’

Every moment at Embercombe somehow led us to learn more about ourselves and about each other. Who knew- Peter can really rap, Dom's into Flamenco, Dalibor's an excellent woodworker. Through an exhausting yet immensely insightful feedback circle on our last morning, we shared with each other what we we respect about each other, what we perceive our strengths to be, and how we might improve upon those strengths.

Perhaps the most important lesson was that being an effective leader is not about telling others what to do, project management, or delegation. And as Liam Black noted earlier this week, it’s not about being the saviour, the tyrant, or the ‘I can do it all’ superhero. Instead, being an effective leader is about being yourself and using your personal style and strengths to move and inspire others. Strong leaders are genuine. They live the transformational change they hope to spark. They make their motivations transparent. They empathise with those they’re leading. They inspire as much by doing as by giving others space to do and grow.

The list could go on and on, but we challenge you to discover for yourself the rest. Come Sunday afternoon we were all reluctant to leave our yurts and to say goodbye to the breathtaking valley views and the amazing home-grown and home-cooked meals. We'll definitely be going back, and we'd urge you to go whenever you get a chance too. We promise that you'll be welcomed with open arms and a warm pot of lovingly cooked lentils.

Fond of the social impact bond?

In an age of government austerity, there is particular focus on spending public money wisely to achieve desired social outcomes. New schemes will involve variants of payment by results and outcome based commissioning. Another similar tool is the Social Impact Bond (SIB). It involves targeted interventions to prevent social problems occurring and the consequent public spending, for example truancy resulting in NEETs and the cycle of re-offending resulting in greater criminal justice costs. Investors fund interventions up front and are paid by the national government in proportion to the spending cuts achieved. The model is likely to work best with the following conditions:

• Timing: reasonable gap between interventions and results, say seven years or less.
• Causation: there is a demonstrable strong causal link between interventions and outcomes.
• Savings: there is a potentially large cost saving for identifiable government departments.
  

An example is an SIB vehicle put in place for St Giles Trust, along with other organisations, to provide support to 3,000 short-term prisoners over a six year period. If successful, investors will receive a return from 7.5% up to a maximum of 13% in proportion to the government savings.

With great expectations of such projects come great risks that must be allayed. The Young Foundation's paper identifies 4 risks:

• Execution risk: there is the difficulty of the outstanding results of a local project run by passionate people that can not replicated on a larger scale. Selection of providers with the ability to scale is imperative.

• Measurement risk: even if a provider can show that the results are statistically significant because the sample size is large enough, and that there is no systematic bias judged by comparison to a control group, there is still the underlying danger of gaming the measure. For example, the apparently robust measure of reoffending is vulnerable because it is measurement of the criminal justice process and not fundamental change of an ex-offender. A pressurised manager could hit targets by persuading the police not to prosecute their users of relatively petty offences for exceptional reasons or by reducing the detection rate of criminal activity by their clients, for example, by moving to a different part of the country where they are less well known to police. Fundamentally, the contractor must be trusted or measurements must be changed to capture the change in an ex-offenders' maturity, social ties and personal identity.

• Basis risk: the reality may be that there are no great savings. For example, the local authority does not save money if a provider prevents young people from going to prison because young offender institutions are funded by the Ministry of Justice. Likewise, to save on prison costs a whole wing of a prison may have to close before government achieves any actual savings. Carefully agreed outcomes and sharing of rewards may make the difference here.

• Unintended consequences: where a current provider of services affecting the target group is not included in the SIB and withdraws support for what could be a host of reasons. For example, in the Peterborough prison example, prison staff not included in the SIB may obstruct its progress so that their lack-lustre performance is not highlighted by the new initiative's success.

I have high expectations that the Peterborough project will be a success and pave the way for greater uses of social impact bonds in the criminal justice system and beyond. The next challenge will be to introduce this at a micro level by overcoming high transaction fees through a simplified model.

Corporate Conundrum

During my placement at O2, I thought about how both Social Enterprises and more traditional businesses can benefit most from working together.

What do big organisations want?

Corporations work hard and spend a lot of money to find out what their customers are thinking. In addition to understanding what services their customers need now, corporates are trying to predict the needs their customers will have in the future to help them design and improve their products and services.

The UK government is starting to act and move resources to the idea that communities can be better agents for change than government acting on their behalf. Insight and knowledge of community is a valuable and expensively acquired resource for private and public business, but Social Enterprises have geographic, social or ideological communities at the heart of what they do. This understanding of their communities is a tremendous asset.

What is the opportunity?

Corporates are big, very big. They have huge reach and potential to unlock resources. However, corporates are feeling the financial crisis too. Investing in innovation and producing new products is expensive and large companies can often be restricted in what they can do without risking their share price. Even fierce competitors are using collaboration and partnership to provide what customers want without betting the farm.

Social Enterprises can add value to corporates because they have insight and practice that other businesses need to improve their services. Social Enterprises do the responsive, community focused thinking and doing that corporates find very difficult everyday.

In return, corporates can provide the exposure and reach that Social Enterprises need to grow and increase their impact.

What not to do?
Don't assume that, because it's a corporate, they will have a lot of money to spend. Much of their spending will be tied up in untouchable budgets promoting their current products/services.

Don't assume that the social benefits your organisation delivers alone will ensure a partnership. Your aims may align with their CSR policy and with their brand image, but they will receive lots of partnership offers that may do this and more.

What to do?
Corporations are always looking for new ways to add value to their traditional offers. A few ideas are to:

• Design a new product just for them. Elvis and Kresse are experts at this, as evidenced by their work with Apple and Brompton Cycles
• Offer to work in partnership with them; don’t ask for sponsorship. Corporates have spent a long time building their business, and they didn’t do that by giving money away. Work out a way to help them to make money while contributing to your aims.
• Help make their staff happy. Replacing staff is a costly business. Lots of people in big companies wish that they could be doing more. Find opportunities to give these intrapreneurs access to the great stories and results you create.
  

If it doesn’t work out this time?
Don’t despair, keep trying and remember to help the people that have helped you! If you have got a meeting in a corporate, it’s most likely because of someone working within that organisation who believes in what you are trying to achieve. The chances are they will be taking a risk/doing a lot of work to get your voice heard.

There are many reasons why large organisations don’t do things. It may be nothing to do with your offer or the work you and your advocate have done.

Stay positive and stay in touch; you may get another chance at a different time.

New Opportunity at CAN for a Social Business Analyst

An exciting opportunity has arisen at CAN, reporting to the Head of Social Investment, for a sharp, eager and ambitious individual looking to cut their teeth in a leading social venture intermediary. Investment experience is not essential but a can-do attitude; commitment and desire to create social good through good business sense are paramount.

CAN is a leading social venture intermediary providing space, capital and business support to social enterprises and charities.

Main purpose of the job:

• Measurement of the economic, social and environmental performance of consulting clients and Breakthrough candidates.
• To identify, analyse and support the performance of growing social enterprises.
• To manage relationships with social entrepreneurs and corporate partners.
• To contribute to CAN’s social investment capabilities and overall development.
  

Please contact Mayowa at m.agienoji@can-online.org.uk for the full Job Description or with your C.V. and a cover letter stating why you would like to work for CAN and are suitable for the role. The closing date for applications is Friday 22nd July.

Tom featured on Destination Changemakers

Jonas Guyot and Matthieu Dardaillon, two students from ESCP business school, are collecting stories about changemakers. They spoke a while ago to Tom and here is their write up of the conversation. Do help us spread the news about their new site!

Escaping to Social Enterprise- with On Purpose

On Thursday evening Tom, current associates Stephanie and Ann, and fellow Harriet spoke at an Escape the City event on social enterprise. We all shared how we 'escaped the city' then answered numerous questions about On Purpose and social enterprise. Check out the main take-aways from the event below (or in the embedded link), written by Rob from Escape the City.

Escaping to Social Enterprise- with On Purpose

A massive thank you to Tom Rippin, Stephanie, Ann and Harriet for a fantastic Q&A and talk at last night's 'How to pursue a career in social enterprise'.

Hope you all enjoyed it as much as we did. Here are 5 areas that struck us as being useful to think about if you're interested in transitioning into the social enterprise sector...

Any remaining questions / comments / connections you would like to make please just leave a comment below and we'll see if we can help you out.

1. Myths about Escaping from Corporates

There are a few myths / preconceptions that are hard to fight if you're considering leaving the corporate world:

• Will I find something as stimulation elsewhere? You can - not everywhere, but there are plenty of places and change itself can be stimulating!
• Will my skills apply to a new sector? Some will some won't but it's also a chance to learn new skills. Think carefully about how your existing skills can apply
• Will I work with as good and dynamic people as I currently do? Great people exist everywhere and if you search them out, you can find them. No one company has a monopoly on them!
• Should I stay for another 6 months to get that promotion/pay-rise/project finished? Before you know it, this turns into 6 years. Think instead of where you could be in 6 months' time in a new place

2. When is it time to move?

Write down your motives for why you took you current job. If you've already ticked those boxes and your motivation for being there is waning. Move. If you don't want your boss's job or their boss's job. Move.

3. Skill-set insecurities

You can apply your corporate experience to social enterprise sector: measuring impact, analysis, transferable skills. Don't feel that you are committed to your sector. The majority of your skills can be put to work in a social enterprise setting. Not to say you will need to learn new skills too - but that's half the excitement!

4. Leaving isn't as scary as you think.

There are a range of orgs that do social enterprise work... from v corporate ones (O2) to "classic" social enterprises to those on the charity end of the scale. Have a think about where on the scale you would most like to work. Narrowing it down will help you search and you will be more specific in your applications. Also think if you have a preference for how big or new an organisation is.

5. It's a broad sector. How to find what you're looking for?

There is so much information / advice / events out there. Start researching!

• Obviously On Purpose itself: http://www.onpurpose.uk.com/
• You can also find them: @onpurposeuk, www.facebook.com/onpurposeuk
• Robert Ashton - How to be a social entrepreneur.
• UnLtd - a charity which supports social entrepreneurs
• The Guardian Social Enterprise Network
• The RSA - lots of talks on social issues
• ClearlySo - hub for social enterprises / social businesses
• School for Social Entrepreneurs
• Social Enterprise London
• Social Enterprise Live
• Social Enterprise Coalition

Check out the Social Enterprise Coalition's 'Work in Social Enterprise' PDF by clicking here.

More about On Purpose...

• Application guidelines::

We're looking for high-achieving people with 2-5 years' work experience in any sector. You need to have great leadership, problem solving and communication skills and a lot of motivation and persistence.

You should also have a track record of social (enterprise) engagement, though we understand this may well not be in a professional capacity.

• See here for more detail:

http://www.onpurpose.uk.com/what-you-can-do/become-purpose-associate

To express your interest in applying (our online application site will be up soon), please email recruitment@onpurpose.uk.com

• Advice for applicants:

If in doubt, apply! And don't forget to tell us why you want to work in the social enterprise space

• Deadlines:

Application deadline will be at the end of August (exact date TBD).

Traineeships at A4E Ltd

A4E Ltd, a leading public service provider, is recruiting two Trainee Strategy & Policy Assistants to support the Director of Strategy & Policy in drafting think pieces and political analysis. The core of the role will be reading think tank reports, developing new ideas, and turning them into concise and powerful written work. As a traineeship, the role is designed to be developmental, giving you an excellent start in government, business or politics. You will receive comprehensive, daily coaching from the Director of Strategy & Policy and will be assigned a mentor from the senior leadership of the firm. There will be extensive opportunities for out of the office work, meeting many of the key figures in Westminster and Whitehall. From time to time, there may also be opportunities for secondment to think tanks, government or political parties on an ad hoc basis. A4E Ltd is looking for staff to start in late summer, though there may be some flexibility for the right candidate. The role is based in its Soho office in London, with some travel to its Sheffield Head Office.

For more details about the role, please click here. To apply, send a copy of your CV and a brief account of why you would like the role, quoting reference number MW201, to Careers@a4e.co.uk by 2pm on 10th July 2011.

New Opportunity for an Operations Manager at My Generation

My Generation, an organisation with a mission to strengthen disadvantaged communities in West London through the provision of individually targeted services, is seeking a Chief Operating Officer (COO) that will be responsible for enhancing the internal organisation processes and infrastructure that will allow My Generation to continue to grow and fulfill its mission. Reporting to the Managing Director (MD) and with a direct staff of five, the COO will manage the following functions:

• Financial Management and Oversight
• Human Resources
• Operations, including risk management, legal activities, business insurance, IT, policy and planning, reporting and monitoring, measurement processes, office management, and Board of trustees support.

For more information visit http://www.mygeneration.org.uk/. The closing date for applications is Thursday 21 July. Please send CV and covering letter to beccamcgowan@mygeneration.org.uk.