This document discusses the future of social investment and policy developments to accelerate the social economy. It notes that individual investors will be key to funding social enterprises given limitations of governments and financial institutions. Various investment instruments like equity, loans, and hybrids will be needed. Funding will be delivered through ethical institutions, advisors, angel networks, and online platforms. Governance, transparency, and professionalism will be important conditions for social enterprises seeking investment. The author's company ClearlySo aims to be a marketplace to connect social businesses with suppliers, investors, and customers.

1. 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 Schwartz CEO Westminster Briefing 24 February, 2010

2. 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?

3. My background: A “financial guy” seeking redemption (and fun) in social investment financial sector and investment social investment 1980 2008 1999 2008 1999 1980

4. ClearlySo: A social business & enterprise, commerce and investment marketplace ii Social Enterprises Suppliers Investors

5. Social businesses and enterprises on the site 17% of businesses on site are non-UK based (as of Jan 2010)

6. ClearlySo is expanding outside of the UK

7. 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)

8. Catalyst Strategy Advisors

9. So let’s look ahead at the outlook for social enterprise funding

10. Changes to social enterprise funding: A Strategic View sources of funding types of instruments delivery mechanisms conditions

11. 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

12. 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”

13. What do we mean by individual investors? social businesses individuals government financial institutions

14. 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

15. 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

16. An aside on this issue of complexity Risk Risk Social Impact Return Return And let’s not pretend we understand what we mean when we discuss social impact

17. 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!!

18. 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!!

19. 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

20. 4. What sorts of conditions will pertain? Governance Transparency Clarity Professionalism “Pitching” ability

21. 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

22. Thank you. Please feel free to get in touch! Rodney Schwartz (rod@clearlyso.com) Twitter: @rodneyschwartz The Social Business Blog (www.clearlyso.com/sbblog)