Seb Elsworth: The 'Pact' and social investment

Charities should be aware of the power they hold when seeking to raise investment

Seb Elsworth (Photograph: Claudia Leisinger)
Seb Elsworth (Photograph: Claudia Leisinger)

I’ve recently come back from a three-month spell of shared parental leave and, with bags under my eyes, I’ve been catching up on some of the developments in the sector.

In particular I’ve been keen to see the report from the Civil Society Futures inquiry, and have been reflecting on what the Pact (the changes advocated in the report covering power, accountability, connections and trust) means for the field of social investment and my own organisation. So here are a few initial reflections.

When money flows there are obviously imbalances of power. At a fundamental level, funders make decisions about where the money goes: who gets it and who does not. 

However, organisations seeking investment need not experience the same power imbalance as those bidding for grants. Social investors talk about making deals, a word that implies benefit for both parties.

The charity might get a much needed injection of cash, but it is expected to be repaid, and the social investor will benefit from the interest as well as playing a role in achieving impact. Charities should be aware of the power they hold when seeking to raise investment.

A sense of disempowerment can also arise when you are out of your comfort zone, when you don’t feel you know as much as others around you. Many charities report feeling like this when they first start navigating the world of social investment.

When we designed the Reach Fund, our investment-readiness grant fund, we were very conscious of the need to design empowerment for charities and social enterprises into the programme, ensuring that social investors and consultancy providers were working to the tune of the charities they exist to support.

Early signs are that our approach is promising, with grantees rating their level of empowerment in the process at 4.3 out of five.

Giving people and communities more of a role in making decisions about how money and other resources are used is at the heart of shifting power.

If done well, the growing trend towards place-based funding can also be a catalyst for this. Moreover, community shares are one example of where this is already happening to great effect. Over the past decade, 120,000 people have played an active role in investing £100m in 350 community businesses across the UK.

These are, of course, first steps. More radical approaches are needed to involve charities and social enterprises, as well as the people and communities they seek to serve in decision-making.

I am particularly struck by the report’s recommendation that accountability practices should be co-designed with those we are seeking to serve. Jazzy infographics might seem like a good idea to us, but right now I can’t honestly say I know whether they really make those we are seeing to serve better connected to our work.

Being clear about who we are seeking to serve is not entirely straightforward for an organisation like Access, a wholesaler of investment and grant programmes.

Our direct relationships are with social investment funds and grant management organisations, which manage the relationships with charities and social enterprises and are, in turn, working to serve people and communities around England.

We think a great deal about how we get accountability right across all these levels of work. Access’s mission is about supporting the resilience of charities so that they can sustain and grow their impact.

We can quite easily ask the organisations we fund to measure changes in the resilience of the charities they work with. But how reasonable is it for us to hold charities to account for the impact of their work on people and communities?

If we believe that a more financially resilient organisation is better placed to deliver impact in the long term, then is it not more appropriate for us to trust that charity to best meet the needs of the people and communities they serve? This of course has implications for what we are able to tell our funders about the exact impact their money has had.

One final thought to leave you with, a hypothesis really.

The report paints a clear picture of the impact that public sector contracting has had on the connectivity of the sector, driving fierce competition and reducing collaboration.

Interestingly relatively few of the organisations taking on investment from our funds are reliant on public sector commissioning for their income. Most are instead trading with the public and other businesses.

I was recently chatting to a chief executive of a well-known social enterprise that does not work with government, but which had previous experience of public sector commissioning in the charity sector.

She said that the social enterprise model allowed for much greater collaboration as a result. Is this a wider trend? And can social investment help more organisations diversify their income in a way that allows them to build business models that can happily co-exist with others, rather than cannibalise each other?

I’d love to know what you think.

Seb Elsworth is chief executive of Access, a foundation that helps widen access to social investment for charities and social enterprises

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