Re-Designing Money – a regional response to the findings of the Commission on Social Investment
Today sees the launch of the Reclaiming the Future: Reforming Social Investment for the Next Decade report. It is the result of the Commission On Social Investment, led by Lord Victor Adebowale, and calls for an additional £800m of new money to further support social enterprise growth, within a radically reformed social investment market that delivers inclusion and equity.
In the report’s foreword, Adebowale says: “In our view, social investment has lost its focus – supporting the growth of social enterprise.” He also believes that “an urgent course correction is needed. Without reform, we will not realise the full potential of social investment. This report is an attempt to reclaim that future, before it slips away.”
But what should this new money look like, if it is to have a greater social impact?
In March, Liverpool’s Mayor Joanne Anderson and City Region Mayor Steve Rotheram invited 20 leaders of the UK’s various social investment funds to talk about the formation of Kindred LCR, as part of The Good Business Festival. They explored how they might work together to match the evident potential for social enterprise growth within the city region and beyond.
Erika Rushton, Kindred’s programme director, says: “I was delighted to speak at the launch of the Adebowale Commission’s report into reforming the social investment market for the next decade, announcing the support of ten of the UK’s social investment funders who have pledged to collaborate in order to match the increasing demand for social investment in the region that is resulting from Kindred’s work. I welcomed Lord Victor Adebowale’s recommendation at the launch that Liverpool City Region should now become the UK’s social investment pathfinder, building on Kindred’s work to date and growing a dedicated Black-led social investment fund.”
Steve Morgan Foundation, UnLtd, Nat West Social and Community Capital, Social Business Trust, Social Investment Business, Key Fund, The Merseyside Pension Fund, Core Cities UK and Seebohm Hill were amongst those who contributed to the discussion, alongside Liverpool City Region Combined Authority, Liverpool City Council and Power To Change. The Good Economy and Access Foundation, who were unable to attend on the day, also contributed to the conversation.
The gathered social investors, offering a combination of public, institutional and philanthropic investment, explored the research assembled to establish Kindred and the learning emerging from the pilot programmes and work of Kindred in its first year of operation.
A set of principles emerged that will underpin a collaborative approach to meeting the substantial evidenced growth for social investment in the region:
Relational Risk: When you have invested your life and livelihood in realising a dream it rarely fails. And when you’ve borrowed money from a community you are part of you pay it back, when you can. Kindred’s evidence suggests STOs are high growth, low risk, high innovation investment opportunities, capable of transforming places. Yet social investment funds using traditional risk assessment tools judge STOs, their target market, as high risk and price their debt accordingly. Attendees agreed that developing risk assessments which take account of relationships would lead to more appropriate risk profiles, benefiting STOs and investors alike.
Demand-led Money: Many STOs involved in designing Kindred money initially balked at the idea of taking on a loan. The jargon of social investment was unhelpful, but when STOs were asked what they wanted to do and what money they would need to do it, something shifted. Pat from Better Lives explained: “I want to be able to take what I need from the pot, use it for as long as I need it, and then pay it back so someone else can have a go.” This, essentially, is Kindred’s model. The terms are tailored to individual business needs, but the principles are designed by the membership to match their requirements. Those who attended Liverpool City Region’s first Social Investment Summit agreed that our money should be led by demand, providing money that works for both STOs AND investors.
Community Impact Investing: Kindred’s sole purpose is to grow the social impact of those it invests in – not turnover or profit, jobs or GVA. The gathered social investors advocated their investment be led by the outcomes and impact – investing incrementally in what works as opposed to holding competitions for the best written bid or most promising spreadsheet.
A Shared Investment Portfolio with Purpose: And finally, investors agreed that between us we have an opportunity to develop and deliver a living, breathing response to the Adebowale Commission and Report in Liverpool City Region. A regional social investment ecosystem in which each investor plays its part, investing and supporting those STOs most suited to their money and collectively shaping our resources to match the full spectrum of STO demand. The Shared Portfolio will provide a lifecycle of investment and support to STOs that allows them to achieve their potential, make all the difference they are capable of, in and with the communities they are part of.
Mayor of Liverpool, Joanne Anderson, said: “My working life has been spent encouraging businesses to make social value-informed decision making at their heart.
“It is the reason I included a Triple Lock in my manifesto, to ensure people, planet and equality are central to everything we do.
“Having businesses with a social purpose makes a difference and creates opportunities for the most disadvantaged, improving people’s lives.
“Working with partners, we have a huge opportunity here to radically reform the social investment market and build the infrastructure that will allow social enterprise to play its part in delivering a more inclusive and equitable economy across the UK.”
Taking a lead from Kindred, conversations and consultations are already happening in Bristol, Newcastle, Manchester, the South Pennines and Yorkshire with a view to setting up similar, regionally responsive and locally-owned funds.
Steve Rotheram, Mayor of the Liverpool City Region, said: “The Liverpool City Region has always been a trailblazer, home to countless breakthroughs and firsts that have changed the world we live in. Despite the turbulence and disruption of the last few years, we’re continuing to lead the way as a force for good. The pandemic gave us an opportunity to press the reset button and reimagine a better future for our region – one that is equal, fair, and where no one is left behind. It’s these values that underpin what Kindred it all about.
“The project is just one of the many ways that our region is leading the way to promote better business practices – we’re redefining what ‘good’ business really means in the 21st century. Of course, we want strong, successful businesses in our region – but we need to go further – we also want them to prioritise how they can enrich people’s lives and bring greater prosperity to the communities they operate in.
“I want the make the Liverpool City Region the best, most socially-just place to live, work and do business in. That’s why projects like Kindred are so important, ensuring that we are supporting the businesses that share those same principles. It’s no surprise that the rest of the UK wants to join our movement – as I always like to say, where the Liverpool City Region leads, the rest of the country follows.”
Collectively, we have already started to radically reform the social investment market and build the infrastructure that will allow social enterprise to play its part in delivering a more inclusive and equitable economy across the UK.
For more details and to see how you can get involved, contact Jen Van der Merwe at Jennifer@kindred-lcr.co.uk.
What is Kindred?
Kindred offers patient money at 0% interest, with options to pay some funds back as social, as well as financial, returns. It’s part of our vision to diversify and boost Liverpool City Region’s economy, post pandemic, and make it a kinder, fairer economy.
Kindred has been funded by £5.5m from Liverpool City Region Combined Authority alongside £1m from Power to Change. Its work is gaining local and national press, for both the innovation of the approach, and the work of its STOs.
• Kindred has been five years in the making. Research by Seebohm Hill estimates that in 2019 a total of £11.3m was invested in 43 social organisations in LCR, with only half a million pounds of that in eight STOs. Estimates by the Kindred team of unmet demand for social investment across the region indicate 740 organisations in need of £35m.
• Evidence from previous work, that has informed development of the Kindred model, suggests that money invested in socially-trading businesses may offer positive financial returns in addition to social impact.
• The money Kindred invests will be used time and time again, as the investee businesses pay it forward, and value will be measured by both financial returns and social impacts.