Big World Capital: Will the June G8 Summit be the moment social investing comes of age?
Wednesday, June 5, 2013
You have to feel a bit sorry for the G8 group of leading industrial countries. Not so long ago their annual get-togethers, hosted in rotation by one of the member states, used to be the most important meeting on the global economic calendar.
Back in 2005, when Tony Blair hosted the leaders of the US, Japan, Germany, France, Italy, Canada and Russia at Gleneagles in Scotland, they all got their chequebooks out and pledged billions of dollars of extra aid to Africa. How the world has changed in eight years. Since the global financial crisis of 2008 the centre of economic decision-making has shifted decisively away from the old powers of the G8 to the wider G20 grouping that includes China, India and other rising powers. Worse, the G8 countries are all in the fiscal mire, so no chequebooks will be waved on 17-18 June at Lough Erne in Northern Ireland when the UK plays host again. Prime Minister David Cameron, however, is still hopeful (well, he has to be, doesn’t he?) that under his chairmanship the G8 can agree on some new ideas to revive the global economy. And what better than a new idea where Britain leads the world: social investment.
Opinion is still divided on whether social investment, also known as impact investment, is the great hope or the great hype. The idea is an appealing one in these financially straitened times: rather than spending scarce government cash or the limited pool of charity money on solving social problems, make your money go further by investing in solutions to social problems that generate financial as well as social returns. It is an idea that has been steadily catching on. Microcredit, for example, has spread widely as a tool to help the poorest of the poor in developing countries (though not without problems or controversies as Kurt Hoffman discusses on page 19). The hope is that social investment can grow similar market-based solutions in education, healthcare, water supply and so on. In developed countries, much of the buzz is about the potential of social enterprises, such as the Big Issue and microcredit provider Fair Finance (see page 9), as a tool of social and economic regeneration. Indeed, earlier this year the European Parliament approved legislation to support social investment, by allowing fund managers to operate across the EU without seeking regulatory approval in each member state.