From dealflow to a lack of education, this week leaders in social finance addressed some of the key barriers preventing the UK market from flourishing. Last month Antony Bugg-Levine, the chair of the Global Impact Investing Network, told delegates at London’s Critical Mass conference that in the world of social finance there were “hypers, haters and […]Read More ›
Unlocking Institutional Investment for Impact: Interview with Ben Thornley, Part II
Yesterday, I posted Part I of my interview with Ben Thornley, Director of Insight – Pacific Community Ventures’ (PCV) thought leadership practice in high-impact investing. In Part II of this series, Ben discusses his views on the relevance of Impact at Scale: Policy Innovation for Institutional Investment with Social and Environmental Benefit to countries outside the US and weighs in on the UK’s Social Value Bill.
Becky Slater: While your report focuses on case studies and examples of success in the US, how would you explain the relevance of the report and its findings to other countries or jurisdictions?
Ben Thornley: I think that it’s very relevant. We focused on the US because there’s a specific legal context under which US institutions invest, particularly around ERISA (the Employee Retirement Income Security Act), the main piece of legislation that governs pension investments. Regardless, every institution is subject to fiduciary duty and the overarching constraints they face as investors in impact investments are consistent across markets. There’s also the challenge of scale and needing to invest in markets that are more conventional, and align with their understanding of modern portfolio theory and how to diversify assets. Every institution is subject to those same constraints whatever country they’re in.
The principal ideas around the way to engage institutions, the barriers to be aware of, the kinds of asset classes that align more with an institutional strategy, I think those are consistent wherever you are in the world. We really see the US as being itself just a large case study and a microcosm of what’s happening everywhere else with institutions. While we focused on the US, we believe that Impact at Scale provides a guide to any country and any set of advocates, funds, or investors who are interested in doing impact investing at scale.
Becky: In thinking more internationally, what are your thoughts on the UK’s Social Value Bill and what impact this, and similar types of legislation, could have on scaling up investments in organizations delivering social and environmental value?
Ben: In my view, a bill like this does a couple things. It’s been difficult to insert very specific requirements within procurement regulations for particular social or environmental impacts. When you see something like this at the national level of a major, developed economy – acknowledging that there are considerations beyond financial ones that need to be taken into account – it sends a signal that not only is this important to us as a people, a democracy, a government, but also that it’s possible to do this in a practical and efficient way. That even within the constraints we all believe are important, namely a competitive bidding procurement culture that is needed to maintain equity among service providers, we also see that there’s a way to achieve the social and environmental impacts we care about without creating too much disruption.
In my view, this is really analogous to the institutional investment market and the idea that increasingly, particularly in the broader concepts of sustainability, some of these things can become embedded within a very mainstream culture of investment.
Legislation like the Social Value Bill (full text, PDF) also begins to have the very practical effect of providing more capital and business to the social entrepreneurs and enterprises that may one day be large enough to be recipients of institutional investments. It has the dual effect of sending a message and demonstrating again that the government can play a role in setting the agenda as well as building capacity among potential recipients of institutional capital.
Stay tuned for Part III of this interview, which focuses on key takeaways from Impact at Scale.