The birth and death of social impact investment

It was a meeting of the Rockerfeller Foundation in 2007 we are told, where the term ‘impact investment’ was coined.

This kind of investment is intended to address social problems while delivering a return to the investor and by 2010 would manifest in the creation of the ‘social impact bond’

It was also in 2007, that an argument for such a strategy came from the social enterprise trenches, with a proposal for childcare reform. Investment which would close down institutionalised care and deliver large scale transition to loving family homes.

By and large it was a message few cared to hear, even within social enterprise. One recent exception was York St John University where I shared part of the proposal describing a social investment fund and the primary social focus. It argued for a fund of 1.5 billion dollars (what was then being spent each week in Iraq) to be enhanced by forward looking businesses.

“In this case, for the project now being proposed, it is constructed precisely along these lines. Childcare reform as outlined above will pay for itself in reduced costs to the state. It will need investment for about five years in order to cover the cost of running two programs in parallel: the existing, extremely problematic state childcare scheme, and the new program needed to replace it for the purpose of giving children a decent life. The old program will be phased out as the new program is phased in. After this phase transition is complete, the state will from that time forward pay out less money for state childcare. Children will have a better life, and will be more likely to become healthy, productive assets to the nation rather than liabilities with diminished human development, diminished education, and the message that they are not important — the basis for serious trouble. There is no need whatsoever to give these children less than a good quality of life as they grow and mature. The only problem is reorganization of existing resources.”

The value of other people had been a recurring theme from the beginning.

As David Floyd writes this week for Pioneers Post, where once the market for ‘impact investment’ had been talked up to 500 billion dollars the first billion has yet to be achieved. He draws attention to the shift since the 2008 economic crisis:

‘Social investment was about helping charities and social enterprises to help the public sector do more to meet the needs of the most disadvantaged people in society and ‘solve social problems’ — ‘scaling up’ to take on bigger public contracts and deliver verifiable outcomes via social impact bonds. When the 2008 financial crisis changed everything, supporters of UK social investment attempted to incorporate these changes into their narrative.’

In 2004, we’d introduced our model of business for social benefit to the UK social enterprise community with a warning about the economy which would be disregarded, or more often provoke hostility.

“The opportunity for poverty relief was identified not only as a moral imperative, but also as an increasingly pressing strategic imperative. People left to suffer and languish in poverty get one message very clearly: they are not important and do not matter. They are in effect told that they are disposable, expendable. Being left to suffer and die is, for the victim, little different than being done away with by more direct means. Poverty, especially where its harsher forms exist, puts people in self-defence mode, at which point the boundaries of civilization are crossed and we are back to the law of the jungle: kill or be killed. While the vast majority of people in poverty suffer quietly and with little protest, it is not safe to assume that everyone will react the same way. When in defence of family and friends, it is completely predictable that it should be only a matter of time until uprisings become sufficient to imperil an entire nation or region of the world. People with nothing have nothing to lose. Poverty was therefore deemed not only a moral catastrophe but also a time bomb waiting to explode. Poverty reduction and relief became the overriding principle and fundamental social objective in the emerging P-CED model.”

In 2011, with the Occupy movement and the Arab Spring we’d experience the reality. Historian Eric Hobspawn would echo what we’d said about people being a surplus commodity:

Joining the Social Enterprise Coalition in 2006, their response was typical of so many which came after:

At present, your area of work lies beyond the focus of our work, however, we know of some people who may be more aligned with what you are going.

From B Labs, the response to my suggestion of collaboration was similar.

With his letter in 2008, to USAID and the Senate, founder Terry Hallman appealed for their support:

There is increasing congruence and synchronicity in play now, to the point of attunement. What Ms. Fore is describing has been central to P-CED’s main message, advocacy and activity for a decade. That, and helping establish an alternative form of capitalism, where profits and/or aid money are put to use in investment vehicles with the singular purpose of helping the world’s poorest and most vulnerable people. The paper on which that is based is in Clinton’s library, dated September 16, 1996, author yours’ truly. That is reflected in P-CED’s home page and history section. In fact, you might notice a number of ideas and writings there that have now made their way into the mainstream of economics and aid thinking, how to make business and aid work smarter and more effectively in relieving poverty and the misery and risks that result. Bill Gates — as hard-edged a capitalist as has ever existed — reiterated the same things in Wall Street Journal a couple of weeks ago (ref below.) It sounds as though Ms. Fore’s remarks very much reflect this sort of thinking. Now it’s time to move forward and get it done.

In 2010 as David Cameron took office as our new PM, I petitioned him with a similar appeal

In 2013, David Cameron, who could hardly wait to hear himself speak, informed us of the fund available for those who have social intentions. He offered the example of placing children in loving families. As also described in Every Child Deserves a Loving Family and The New Bottom Line.

Perhaps the biggest irony in David’s article is his valid point about the need for new models to address the anger and resentment from those displaced by a post Brexit economy.

In 2012 , EU Commissioner Michel Barnier was introduced to such a model when Sir Graham Watson drew his attention to our ‘Marshall Plan’ for Ukraine. His own EPP party were soon promoting their own version, as was oligarch Dmitri Firtash.

Within two years, anger erupted into violent conflict, and the man who took us into war with Iraq was singing from our hymn book at Davos, asking if capitalism could deliver both financial and social returns.