Image of Amir Rizwan

Amir Rizwan

Investment Manager

Charities Aid Foundation


VENTURESOME'S SOCIAL INVESTMENT PREDICTIONS FOR 2018

05 February 2018

On the 18th January 2018 NESTA released its 10 predictions for the coming year. Since 2011 NESTA has been raising its head above the parapet to set predictions on the year based on its work on technology, innovation and system changes. Granted, not all of these 10 predictions will come to fruition (for problems relating to future predictions please see the last General Election…) however NESTA should be commended for getting us to think about some of the major changes that could impact society as a whole.

Geoff Mulgan, CEO of NESTA, was keen to stress to the eclectic audience that people should unpick and challenge everything presented (a key part of the path of innovation is around challenging ideas such as these). A recurring theme of the 10 predictions was around the impact of artificial intelligence both to enhance creativity (there was a prediction the winner of the 2018 Turner Prize being an AI and artist duo) and improve the way in which we interact with the services we use.

There were some darker predictions such as the use of emotional surveillance going into the mainstream which raises all host of privacy issues. This was all fascinating stuff and got me thinking, what would make for 10 interesting predictions for the social investment market in 2018. So without further ado, and a month late, here are my predictions for 2018, with the usual caveat that none of these may even materialise however I do hope they start interesting conversations on what social investment could look like by the end of 2018.

OUR PREDICTIONS ARE:

 

1. Political uncertainty hits the sector

The continuing political uncertainty that currently exists in the UK will continue to impact negatively on the social investment sector. The key reason for this is the way in which this uncertainty from issues such as Brexit and government austerity will continue to impact on the funding challenges that charities and social enterprises currently face and as a result impact on the deal flow that social investment funds have (expect to see changing needs and more organisations coming to funders looking for support to manage more volatile and challenging cashflows).


On the flip side, some political fallout presents an opportunity! Take the Carillion episode which has put a dent to the perceived notion that the market knows best. Expect to see this and the on-going debates about business to give more of a platform for the rise of social enterprise as a viable alternative to the status quo.  

2. THE GROWTH OF PLACE-BASED FUNDING PROGRAMMES

The growth of place-based funding, which nascently started, will become even more prevalent. The drivers to this growth will be based on a number of factors; the ever-growing push towards more localist policies, the continued growth of the social enterprise model in areas outside of the South-East and a growing demand for more specialised funding that takes into account local issues.

3. BLOCKCHAIN

The last few years have seen the growth of crypto currencies and the exciting world of new financial processes such as blockchain. There are opportunities around Development Impact Bonds (which are notoriously hard to scale and measure) where blockchain could act as a real-time output indicator and set a smart contract that would release a payment when an outcome has been achieved. There is also the use of blockchain to raise money from investors that can be traded freely over an exchange. 2018 will be there where the social investment market will see its first interaction with this new form of finance (impact coins anyone?).

4. GROWING DIVERSITY OF FUNDERS

Social investment began initially as the domain of specialist funds helped by the creation of wholesale institutions such as Big Society Capital. This year we will see the continued growth of investors and funders that are from a variety of sectors. Expect to see large charities, member organisations, housing associations and traditional financial organisations (also known as banks) enter the space. Within this growth of funding there will be a focus on funds that are there to meet the needs of specific beneficiary groups or clients that these organisations work with.

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5. USER-LED DESIGN IN STRUCTURE AND COMMISSIONING

User-led design processes have already been used last year to create the Good Finance website, this year we will begin to see that same process enter the social investment market in a big way. One of the biggest manifestations of this will be around how such a process can help reduce the confusion and lack of clarity around the language and terminology used within the social investment landscape (I actually led a session on such a topic at last year’s  Oxford Marmalade). The sector is still full of too many acronyms and jargon which does nothing than add further noise. The work done by Good Finance will lead to investors and funders looking at the way they interact and work with the customer base that is engaging with social investment. In this same vein there will be a growth of the idea of co-designing practises to shape interventions (both with investors and commissioning bodies) as a way of ensuring that users of services and activities are placed at the centre of initiatives (some of the recent developments of social impact bonds show how this can work).

6. THE BIG DATA RUSH

The use of data within the social investment sector has been something that to date has only been a factor relating to the way impact is measured. However, with the growth of the sector there is now a push to improve the way data is used to better understand the social investment market, the risks associated with social investment and how products can be tweaked to better meet the needs of social organisations. 2018 will be a year in which there will be more of a push to improve the transparency of market data and the use of data to improve the processes around social investment.

7. THE EVOLUTION OF SIBs

Social impact bonds are here to stay, what is of debate is how they will evolve to take on board both the needs of commissioners, investors and lead organisations. The blog already discusses how blockchain can help transform the impact measurement and payment process. An interesting area will be the growth of development impact bonds and in 2018 we should see further development in this nascent area. Expect to see developments such as the creation of an outcome fund, the creation of global funds to support the achievement of targets such as the Sustainable Development Goals and changes to international legislation to support the growth of development impact bonds.

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8. HITTING THE MAINSTREAM

One thing to note, I fine the word ‘mainstream’ rather cliché. However, 2018 will see further moves by social investment to enter a space where individuals can look to invest with an impact lens. Policy and regulatory changes, which have already had an impact, will continue. There will also be further growth in charities and social enterprises raising investment from platforms such as Ethex or crowdfunding platforms (recent examples include the successful bond raise by Our Power CIC). There will also be further moves by philanthropists and high-net worth’s into the social investment space through new funding platforms and the increased data and track record of the sector.

9. COLLABORATIVE ECOSYSTEMS

The growing need of social organisations to tackle some of the most pressing issues facing society require a joined-up way of thinking both within the social investment sector and in areas outside of the sector. 2018 will see the development of ecosystems (add this to the cliché word list) that will see investors working with local government bodies, network organisations and grant funders to provide the support for organisations to tackle pressing issues within specific geographical or cause related boundaries.

10. THE END OF THE TERM "INVESTMENT READINESS" (FINALLY!)

With the end of the Big Potential programme in December 2018 there is a need to think about the way in which investment readiness support is provided to organisations and the capacity support social organisations need beyond having it there as a way to successfully raise investment. Expect to see further work on this and the development of bespoke support provisions with more of a focus on social organisations taking more control around how it works and for support not to have an inherent link to the need to just raise social investment. Maybe we will finally see the end of the term ‘investment readiness’…




Want to know more? Talk to our team on 03000 123 300 or email us at venturesome@cafonline.org and we’ll be happy to help.

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