Reflections on the role of impact investment in post-Covid19 recovery
9 Oct 2020, 6 a.m.
Aman JohalInvestment Director, Big Society Capital
Social impact investing
Fellows of Practice
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This is the fourth article in our blog series from our Fellows of Practice 2020 on how outcomes-based contracts are adapting in light of Covid19. In this piece Aman Johal, Investment Director at Big Society Capital, reflects on how socially-motivated investors in the UK have responded to the crisis and the emergent thinking around the role of impact investment in post-Covid19 recovery.
In the social outcomes contract market in the UK, many have been wondering what the role of investors has been in this time. First of all, I think it is important to distinguish between asset owners and managers of capital. In this world, I find that the majority of the discourse conflates both into a homogenous group of ‘investors’, which can be confusing.
The investors (or ‘asset owners’) include us at Big Society Capital (BSC), as well as individuals, local authority pension funds, foundations, global institutions and even housing associations. All of whom have invested with an impact-driven mandate. The ‘managers’, which in the UK context consists of organisations such as Bridges Fund Management, Big Issue Invest and others, are investing on behalf of these asset owners to whom they are ultimately accountable. In the UK, it is these managers that are mostly working on a day to day basis with the projects that are delivering vital services to individuals to ensure that they have the support they need to continue delivery.
At BSC specifically, our response to the crisis has been to focus on three areas: sharing information, adjusting existing funding with the managers we invest in, and exploring new funding where needed. This has been across all of our investment areas including social outcomes contracts and the crisis has taught us some interesting lessons.
1. The true motivations of investors
The crisis has been devastating and therefore has tested how socially motivated the investors really are. From our perspective it has been reassuring to see that conversations between ourselves, other investors and managers have focused predominately on impact risk and ensuring that service delivery can continue. Nor have any investors in this space withdrawn their remaining funding commitments.
As delivery organisations in this space are already used to being held accountable for outcomes and not to service specifications, they were in a relatively good position to adjust. Very quickly we saw service adaptations implemented to ensure that vulnerable individuals were still being reached. For example through switching to online and remote delivery and in some cases this has even enabled a higher frequency of contact and engagement, as reported by West London Zone, which works with struggling young people in schools.
3. Relative stability
Given that these delivery organisations are also paid on a revenue funding basis for day to day delivery (so there are no loans to repay or interest to service), this has meant that funding and support for these organisations has continued during the crisis, which unfortunately cannot be said for all others. In fact, because these are backed by socially motivated money, some have even been able to access further funding in this time of crisis if they have needed it to extend or adapt delivery.
As we look forward to recovery, we are focusing our efforts on capturing and refining our learning on how and where this tool can be effectively utilised to support vulnerable individuals. We know that it will not work for every public service in every location but we can appreciate that where it does work, it can achieve real results in a flexible, resilient and accountable way.
Ultimately, through the work of the managers that we at BSC invest in, we have been exposed to and blown away by the incredible work being done by the local delivery organisations who have gone above and beyond for the individuals that they are supporting during this unprecedented time. So, we are looking optimistically to the future to see how our capital can continue to help.