The Big Issue exists because people took a risk. But it was not only money that was at stake to launch a street newspaper that would go on to become a global force in tackling homelessness, poverty and marginalisation.
The first edition of hit the streets of London in 1991 because certain individuals took a punt on an idea in the realm of the unknown. The idea was that a business could be a major force for good; that a model of business could be created to untangle deeply entrenched social issues and that investment in this idea could deliver social and financial returns.
There were many doubters, critics and dissenters. Conventional thinking hadn’t changed for centuries: business was there to make money and create wealth, while charities, philanthropists and the State would look after anyone unfortunate enough to slip through the net. But as Thomas Paine pointed out in 1776: “A long habit of not thinking a thing is wrong, gives it a superficial appearance of being right.”
Indeed, this polarised worldview was deeply engrained in ‘group think’, making the challenge of raising capital to test the idea even harder. Was it investment or philanthropy?It fell somewhere in the middle, which was bang outside most people’s comfort zone.
Breaking the mould
It simply did not fit the mould of prevailing common sense. No one got the concept of us making a profit by selling newspapers to homeless people, who, in turn, would then sell them on the streets to make profit for themselves. No one could see how a business model in pursuit of profit could be used to help hundreds of thousands of people break their dependency on handouts, begging, crime and prostitution. And why, after generating a profit, would we mug ourselves all the way to the bank, by reinvesting it to tackle the underlying causes of homelessness.
Fortunately, Body Shop co-founder Gordon Roddick was able to make the cognitive jump, realising that investing in a business could also deliver the goals of philanthropy. What’s more, his investment would deliver social impact year after year across the world.
Roddick invested the start-up capital and support that enabled social entrepreneur John Bird to found The Big Issue. The idea would live or die in the marketplace. The rest, as they say, is history.
The story of The Big Issue is important because it reveals something about the shift in thinking that lay the ground for the emergence of social enterprise. Perhaps more importantly for the readers of FOG, it gives a rude awakening to the fact this history could never have been written without an investor willing to break the mould —for a philanthropist this was never about taking a risk with money, it was about taking a risk with the unknown.
Investment journey
Therefore, The Big Issue set up Big Issue Invest (BII) in 2005 as its social investment arm, raising mainly private capital to invest in social enterprises that prevent and tackle poverty.
Investments have directly benefited more than 1.8 million people, sustained 3,200 in employment and trained over 14,000 people. Over the past five years, BII has maintained a loss rate of less than 2.2% on all lending, ensuring a constant cycle of investment to be put to good use elsewhere.
To date, we manage or are the social advisors for more than £85m from individual and institutional investors (managed and advised) and have invested more than £29m in 330 organisations. There is a blurring of lines between business and philanthropy as banks including HSBC and Deutsche Bank sit comfortably alongside entrepreneurs, family trusts and charitable foundations, creating a new blend of capital with the specific purpose of delivering social change and addressing market failure.
Growing demand
BII has seen a huge rise in demand in the decade we’ve been running and next year we’re seeking to up our funds to more than £200m (both managed and socially advised).
The credit crunch prompted a cultural shift in how to re-evaluate the value and role of money in society. There is a new generation of people coming to us who would have perhaps traditionally worked in the voluntary sector or in local authorities. They are turning to the social enterprise model to deliver a social impact and have a very clear sense of being able to do business in a different way.
Similarly, the next generation of finance and investment professionals, encouraged by governments and public opinion, are doing more to understand the social value of money.
This blurring of the lines between wealth creation and philanthropy is abundantly clear from the huge interest in The 6:30 Club we are in the process of setting up as a forum for leaders in business and finance to develop innovative approaches to social change.
Social enterprise is filling a void left by the shrinking of the State and the financial pressures facing charities at a time when their services are needed most.
Many charities have become indistinguishable from social enterprises, increasingly seeking to ‘earn’ revenue to bolster both finances and independence (often from ‘strings-attached’ philanthropy).
This looks certain to continue as governments, strapped for cash and inspiration, ‘outsource’ the social problems.
Rising prominence
Our job is to develop a range of investment products capable of accessing capital from wherever it sits; capital markets, household savings, governments, philanthropists and so on. We’re currently raising a second round of investment for our Social Enterprise Investment Fund, which provides growth capital to high impact social enterprises and seeks to deliver reasonable financial and social returns to investors.
As a ten-year closed-ended fund this is for institutions and qualified investors comfortable with the idea of patient capital.
We are taking social investment into the mainstream through a partnership with Columbia Threadneedle to launch the first social investment fund offering daily liquidity.
The fund targets social outcomes as well as financial returns by investing in listed bonds with clear social benefits.
Social investment is challenging traditional notions of the role of philanthropy and the markets. The divergence of both is well underway and is helping to turn brilliant, impactful ideas into living, breathing entities delivering social and financial returns.
Social investors are proving the value of money goes beyond simple economics. To think, all this has been achieved, by a few people going into the unknown with an idea of how social investment can tackle poverty.
