Now’s the time for all UK banks to become social investment banks

With the daily stream of news about governments forcing banks to rethink some fundamentals about their role in society, it would seem a good time to revisit the idea of social investment banks. I while back I posted about the moves in the UK to establish such a vehicle which would tap into dormant funds in UK commercial banks to open up a finance channel for social initiatives such as social enterprises. The establishment of Social Finance in the UK, tasked with opening up such a market is a concrete step.

Given that the governments in most western nations now own substantial equity stakes in the major commercial banks, surely it’s time to focus the executive teams on longer-term social responsibilities that now lie well beyond short-term shareholder interests? Research by Triodos Bank which appears to have weathered the recent crisis, shows that survey respondents would certainly welcome and support such a move if only the government were brave enough to direct it.

Paul Graham and Jeffrey Sachs’ Reith Lectures – an interesting mashup of wisdom and intelligence.

I read Paul Graham’s essay entitled “Is it worth being wise?” with interest. In a provocative piece he challenges the conventional definitions and interpretations of wisdom and intelligence and invites debate about the apparent divergence between the two concepts.

Whilst it’s interesting, he misses the point that both are required here and now to solve the major problems we face globally. To illustrate how both are necessary and need to work in concert at the individual and collective level the economist, Jeffrey Sachs’ final BBC Reith Lecture of 2007, “Global Politics in a Complex Age” sets forth an ambitious but achievable basis for enacting shared global goals – what he refers to as the Millenium Promises – around climate change, extreme poverty reduction, non-proliferation of nuclear weapons, protecting biodiversity and halting desertification, manifest in a series of global agreements.

He calls for the public, governments and all in between to embrace the challenge of focusing on these shared goals and using our scientific and technological know-how to solve the problems we’ve created. With lots of excellent historical quotes and plenty of practical ideas for agency, he calls for individuals, social entrepreneurs, business, expert groups (scientists), and governments to forge a new basis of global cooperation through an open source approach to global problem solving, played out locally. Sachs brought to my mind once again, EF Schumacher’s brilliant, Small is Beautiful. In the follow-up questions, there’s some great contributions from John Curtice, Bernard Crick and Pat Kane. Wisdom and intelligence in concert, indeed.

Links:
Paul Graham – Is it worth being wise?
Jeffrey Sachs – Politics in an Age of Complexity
E F Schumacher – Small is Beautiful

On What you measure matters the most

Measures, targets, metrics, ROI, KPIs.. we can’t escape the things. In a gem of a post, Tara Hunt explores the idea of measures for economic, social and online community health. Related and also interesting reading is the Futurebrand 100 as reported on Antony’s blog.

I think Tara’s identified a really important missing element in a shift towards social progress that’s occuring in commercial, public and private spheres, particularly amongst online communities across all three. Replacing GDP with a General Progress Indicator is spot-on. There’s more to life than economic growth indeed.

In a comment on the piece, Colin provides a great quote: “what gets measured gets done”. Or, attempts are made to get it done, and lots of effort goes into working out how to measure it, and a large amount of faffing about with powerpoint goes on regardless.

I think some politicians and many communities in the UK and elsewhere are waking up to the opportunity cost of a perpetual economic growth based model. In basic economics (as I hazily recall from university) opportunity cost is a really important concept for measuring the true cost of an opportunity – including the lost benefit of alternatives. So scary stuff for businesses that pollute overly the environment and obsessively use powerpoint. I love Edward Tufte on powerpoint by the way. I’d also love to be involved in determining the true indicators of progress.. They would surely have to be developed by an independent entity, not a single political party.. Perhaps it this could happen if the wave carrying social enterprise continues. A cross-party body balanced with outside representation?

Back to measures.. Been thinking about the Social Investment Bank concept a lot. For the benefit of those who haven’t read the previous post – this a concept of the utilisation of unused assets (or idle finance/dormant capital) by channelling it into socially beneficial initiatives – eg projects aimed at reducing poverty in deprived areas, through the support of social enterprises that generate social value as well as profit.

So a venture capital fund of sorts but with the key metric, social value, as it’s primary indicator of success. At a micro level, it’s pretty easy to set up a social enterprise as a legal entity. The growth of social enterprises would be a good and relatively easy to determine measure of progress. Amongst the metrics could be the volume and diversity of lending and success of funds shared by a Social Investment Bank. I guess I should read the full report and see if this sort of stuff is included in it’s objectives.

As for online.. for commercial entities. It seems to me that an important approach to take is to rethink what constitutes brand equity amongst groups like boutiquers and work out ways to measure it. My colleague Antony Mayfield’s post on Futurelab 100’s remix of the Interbrand 100 discusses the Futurelab criteria and the positive and interesting shift that could occur if theses measures were the norm. It’s a great way of looking at which brands ‘get it’.

Link: The Futurelab 100

Towards a social investment bank?

In an interesting episode of In Business on BBC Radio 4 tonight, Sir Ronald Cohen outlined the idea of a social investment bank. Taking the long term view, he described how idle finance (my term) or unclaimed assets could be diverted to tackling market failure on a large scale through investment in deprived communities.

Having been briefed by the Chancellor, as Head of the Social Investment Task Force, Sir Ronald’s report on idle finance led to Ed Miliband’s statement earlier this winter about further stimulating the social enterprise sector. My money’s on social enterprise becoming a central part of government thinking if Gordon Brown assumes the top job later this year. Perhaps even the establishment of an independent Social Investment Bank within the first budget. The Tories have already made noises in this area too and so there’s likely to be cross-party support for the broader idea, but as James Blitz in the FT points out, there may be dividing lines in the debate over voluntarism around the scale of enterprises, with Labour accused by the Tories of favouring larger over smaller, more localised organisations.

Under Blair, big initiatives have been the way, often fizzling out – such as pathetic ‘Big Conversation’ in 2003. I hope that if Brown is elected by the party, that he takes the long view and gives a greater role to localised, small scale social enterprise.