In early 2013, the Big Lottery Fund and Big Society Capital commissioned a report into the future of social investment, with particular regard to the infrastructure that supports the market.

This report - Angels in the Architecture - explores the evolution, characteristics and infrastructure of other markets and draws lessons which could help the development of social investment. This includes acknowledging the time it takes for an emerging market to reach maturity, what is meant by 'infrastructure', the role of subsidy, the significance of governance, ownership and business models, tensions between social and financial value, the role of tax incentives, the need for honesty about return expectations and the importance of cultural and political factors.

The report then explores what we mean by social investment and the characteristics of the current market (with uncertain demand, concentrated supply, difficult intermediation, imperfect information, troubling cultural factors and a significant role for government).  It also looks at tensions in the marketplace, including diverse perspectives, ideology and politics, views on the pace of change, the nature of investors and the underlying business models of the social sector. It then goes beyond these towards more common ground and what a more effective market or ‘better place’ might look like.

The report takes stock of the current market infrastructure and identifies priorities for the future (including data and information provision, product development, some brokerage and advisory services and mechanisms for collaborating). This leads to a number of targeted recommendations, in particular, that:

  • advocates of social investment should ensure that the rhetoric around the market more adequately reflects the stage of development of the market;
  • the Big Lottery Fund and Big Society Capital should consider how they support priorities for market infrastructure through ‘concessionary’ capital or a voucher model, while staying mindful of directing resources away from the frontlines; 
  • potential funders‘ conditions encourage the most appropriate ownership, governance, transparency and accountability standards; support a diversity of organisations, leverage other resources; and encourage collaboration; 
  • emerging infrastructure bodies should carefully consider governance, ownership, transparency and accountability standards, and provide greater clarity on whether they seek to support access to finance for the social sector, on one hand, or social or impact investment on the other.

When it comes to financing social enterprises, we can all too often lose perspective, as the devil is in the detail. So we need angels in the architecture.

To read the report, click here.