It seems a week doesn’t pass without a new report on social investment. It is sad, but perhaps not surprising - given the pressures on real businesses struggling through the current economic and fiscal climate - that the majority are written by the financiers, intermediaries and the money men. Their side of the story is quite legitimate, of course. But if we only ever tell one side of the story, then we risk peddling half-truths.

It’s still an intriguing tale though, and one we have been telling ourselves for over a decade. While away from the page, the market has moved, the numbers have multiplied, government programmes have come and gone and new players have arrived, much of the story remains the same.

Next spring it will be 10 years since the publication of the Bank of England’s seminal The Financing of Social Enterprise, A Special Report (perhaps we should have fewer reports and more special reports). In the first serious publication of its kind, the BoE revealed that there was “little demand for, or supply of, either conventional venture capital or business angel finance in the social enterprise sector”. Over 8 years ago Bridges’ Equity-like Capital for Social Ventures identified “still (sic!) a disconnect between social investors and social ventures”.

Plus ça change. Wind forward almost a decade and a report for the Big Lottery (and I apologise for my role here in cluttering up the narrative) also identified how social enterprises “predominantly seek risk capital on sub-commercial terms... what is on offer from investors is larger asset-backed capital on near commercial terms”. Another recent and fantastically titled report for Big Society Capital - The First Billion - also identified a shortage of available risk capital on appropriate terms. But in some ways, the story has changed rather more dramatically…

  • First, back then people talked about “social enterprise access to finance”, looking bottom-up from the needs of the sector. Today, the narrative is one of “social investment”, which looks top down from the point of view of the investor.
  • Second, the more recent (Atlantic?) drift towards a language of “impact investment” suggest a rational and more deterministic emphasis on results, outcomes, impact and ends rather than an attachment to a particular model of ownership, the means of production, what happens to profits and a social raison d’etre.
  • Third, the debate has shifted from a focus on market failure, filling gaps and addressing unmet need to a leap of faith in social investment as a good thing per se. Ditching an analytical methodology for a value judgement seems actually quite remarkable given the otherwise seemingly ubiquitous triumph of the ‘evidence Taliban’, the all-conquering mantra of pursuing ‘what works’ and - if you agree with Malcolm Tucker - “a political class which has given up on morality”.

To summarise these three shifts, it seems we have turned away from working to make markets serve society as best they can and instead, adopted a belief that investors know how to make the world a better place.

I wouldn’t dare to suggest that this shift, or this belief, are wrong. But in the light of what else has been going on in the financial system over the last ten years, it’s a pretty brave move.

In 10 years’ time, if we’re still churning out reports bemoaning the absence of appropriate risk capital for social ventures, then we’ll know we took a wrong turn. If this shift of emphasis is right on the other hand, then great, and many social enterprises will inevitably benefit too, finding it easier to access the finance they need.

What we can say, is that this shift helps explain why some people out there in the real world have given up following the grand narrative of social investment. Belatedly realising that “social investment is not for everyone”, they are writing their own scripts: financing local, social ventures through the tools of community investment, local share issues and peer-to-peer lending. Or ploughing on with their same old stories of bootstraps, overdrafts, grants, friends, family and fools. These tales may be less powerful and seductive, but, right now, they seem a lot more authentic.