Social entrepreneurs may need to turn to private "social" capital for help in tackling society's ills
By John Elkington
How we love to hate bankers. Some people may even welcome the news that HSBC will axe more than 10,000 jobs, following earlier redundancies at Credit Suisse and UBS. But to welcome the squeezing of banks would be to undervalue the crucial role they can play in our economies—when minded to do so.
In capitalist economies, banks rarely have the wider social good in mind, unless explicitly set up with social purposes. But the enthusiasm that greeted the launch of a new bank by the UK Government suggests a development that governments, banks and social innovators and entrepreneurs elsewhere should watch closely.
Social entrepreneurs have been lionized at events organized by the World Economic Forum and the Clinton Global Initiative – but the downside is they are now expected to shoulder a growing share of society’s intractable problems as governments’ budgets are cut. There is growing concern about just where the funding will come from.
Part of the answer has been well-endowed foundations set up by multi-millionaires or even multi-billionaires from the New Economy boom period. But even such welcome generosity only takes you so far when spread across the immensity of social and environmental problems countries and communities face around the world. So the next question is what role governments can – and should – play in funding all of this?
Part of the answer is now becoming clear, at least in Britain, with the launch of ‘Big Society Capital’ (BSC). The first two words reflect the fact BSC aims to help deliver Prime Minister David Cameron’s of a ‘Big Society,’ created more by citizens than by government. Originally dubbed the Big Society Bank, it had to drop that name when the regulators concluded it would not offer a sufficient range of banking services.
Run independently from government, the BSC will afford socially orientated financial organisations greater access to affordable capital, using an estimated £400 million in unclaimed assets left dormant in bank accounts for over 15 years and £200 million from the UK’s largest high street banks.
Sir Ronald Cohen, who made his money in private equity and has been a long-standing pioneer in social investment, will be BSC’s non-executive chair. He notes, "innovations such as social impact bonds and a burgeoning array of organisations operating across the social sector suggest that we are on the cusp of a revolution. The social sector now has the prospect of attracting funding in the UK to support social entrepreneurs, much as venture capital and private equity did to support business some three decades ago."
It remains to be seen how quickly the capital is channeled to deserving social change agents, how well they do in leveraging the funding, how quickly BSC can access other funding and how attractive this model will prove elsewhere. These are the known unknowns – and history suggests there will also be unknown unknowns. But at last there will be one group of bankers who can hold their heads up in society.
About John Elkington
John Elkington is executive chairman of Volans, co-founder of SustainAbility, blogs at JohnElkington.com, tweets at @volansjohn and is a member of The Guardian’s Sustainable Business Advisory Panel.
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