Through its 2014 commitment, Big Society Capital (BSC) is committing to designing and implementing an investment 'challenge prize' that encourages private companies to make large-scale and high impact investments in partnership with social impact investors. BSC will work with Nesta, the UK's innovation agency, to solicit interest from corporates and select a high-impact investment opportunity. The winner of the prize will receive funding for a project, venture, or investment fund that creates significant social impact in the United Kingdom.
BSC will take the lead in executing the prize design, evaluation and selection process in collaboration with Nesta. First, the selected investment must generate both a strong financial and social return. BSC will prioritize proposals on the basis of total social impact, balancing an assessment of both depth and breadth. Proposals which target interventions for the most deprived parts of UK society will be preferred, as will investments in the areas of health, education, or employment.
The investment opportunity must fund a high impact social purpose organization (that acts as an intermediary) with a clear social mission that goes beyond traditional forms of corporate social responsibility. The underlying investment must be based on a financially viable business model that can support investment with both a financial and social return (i.e., with measurable social outcomes). The corporate partner will be expected to provide matching investment capital (on a 1:1 basis) for the initiative. The predominant focus of the investment should be to generate social impact within the UK (although all types of companies -both domestic and international - will be encouraged to apply). The investment selected will be subject to Big Society Capital's standard investment due diligence process.
To date, BSC has structured and invested in deals worth more than half a billion dollars for social purpose organizations in the UK, including government innovations through social impact bonds, to designing innovative new investment funds that target specific social issues, to providing loans to charities via established banks.
Big Society Capital (will design the challenge prize during the autumn of 2014, with the aim of launching the prize during the winter of 2014/15. The corporate partner will be selected in the latter half of 2015 (to allow for corporate budgeting cycles).
During the design phase, BSC will work with Nesta to refine and test the challenge statement with a few select corporations, agree on the appropriate social impact evaluation criteria, and assemble an evaluation committee. It is expected that the prize will be launched during the winter of 2014/2015.
Once the prize is launched, BSC will market the prize through various communications channels and corporate events. BSC will take the lead on all communications related to the prize, using media and business networks throughout the UK. BSC will assemble a panel to review all proposals, and the finalists will receive design support from Big Society Capital as needed during 2015.
Upon final selection of the corporate partner, Big Society Capital will conduct financial due diligence necessary in 2015, iterating as needed. It is expected that the investment project would go live by 2016. BSC will manage all communications in collaboration with the corporate partner.
At the conclusion of the selection process, BSC will share key insights and analysis of its engagement with corporates based on discussions and prize submissions received.
Big Society Capital and its corporate partner will then execute and monitor the investment according to its intended social outcomes and report those results back to CGI (depending on the duration of the initiative).
Social impact investment is the provision of finance to generate both social and financial returns. Over the past two years, more than million has been invested in new social impact investments in the UK coming from the public sector, foundations, and financial institutions. Private sector corporations have been largely absent, accounting for less than 5% of these investments. Global impact investment data from the GIIN and JPMorgan also suggests that private sector corporates account for less than a quarter of existing impact investments (based on assets under management), dwarfed by the investments made by development financial institutions, foundations, family offices, and banks.
Ironically, corporations are often better positioned than others to invest in and scale many solutions that address some of society's most critical challenges in areas of education, health and employment. By measuring tangible social outcomes and linking them to financial results, social investment can act as a useful tool for funding social innovations. For example, companies such as Coca-Cola and Nandos have structured a social impact bond that will fund malaria treatments in Mozambique, and will pay a return to private social investors if material business improvements are realized. Similarly, British Gas has recently launched a 10 million Euros investment fund that is providing capital and skills to profitable social enterprises addressing rising fuel poverty in the UK.
Big Society Capital is seeking to partner with a large corporation with operations in the United Kingdom that seek to invest in creating social outcomes related to its business. The corporate partner would provide a person/team to liaise with Big Society Capital and design a social investment vehicle related to their core business. Additionally, the corporation would provide investment capital (50%, matched by Big Society Capital) and capacity for the execution/monitoring of the results (alternatively the partnership could employ a performance manager). Big Society Capital would also look to identify a member of the Board or senior management team that would act as a champion of the project, being involved in the governance and performance monitoring of the effort.
Big Society Capital is offering social investment capital, investment design support, and communications support to a corporate partner that wishes to co-invest in targeted social outcomes. Big Society Capital has already invested in social investment transactions worth more than $500 million over the last two years, including the design of over 30 investment funds and other structures. We can provide our expertise and best practice design based on previous investment experience. From a financial perspective, Big Society Capital can provide matching capital for a corporate investment in social outcomes and can, if necessary, act as a mediator to link a corporation with other social investors that are interested in funding similar initiatives. Big Society Capital will also provide a small team of investment professionals to assist with the design and monitoring of the fund or project structure. BSC is willing to involve other social investors such as high net-worth individuals or foundations where additional funding resources are needed. BSC will also commit to sharing key learnings from its engagement with corporates, providing transparency and analysis of the interest received from private business and the potential for social investment.