Download Learning from the US - Impetus-PEF

FROM SOCIAL INNOVATION
TO SOCIAL INVESTMENT:
Learning from the US
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FROM SOCIAL INNOVATION TO
SOCIAL INVESTMENT: LEARNING FROM THE US
“The bottom line is clear: solutions to America’s
challenges are being developed every day at the grass
roots – and government shouldn’t be supplanting those
efforts, it should be supporting those efforts. Instead of
wasting taxpayer money on programs that are obsolete
or ineffective, government should be seeking out
creative, results-oriented programs … and helping them
replicate their efforts across America.”
President Obama, June 2009
Executive Summary
The Social Innovation Fund
• The Social Innovation Fund (SIF) was established in 2009 by President Obama. To date it
has provided $137million of federal money to act as a catalyst to drive social innovation
and social change, as well as increase the amount of philanthropic capital in the social
innovation sphere.
• Uniquely, the SIF’s funding flows through a network of selected philanthropic
intermediaries (including venture philanthropists), which match government dollars 1:1.
• Intermediaries then provide funding, as well as capacity-building support, to communitylevel organisations, developing and delivering solutions around economic development,
health and youth opportunity, and in certain geographic areas. These sub-grantees must
also match the funding 1:1 from any non-federal sources. This means every government
dollar is leveraged 1:3.
• The SIF emphasises the need to increase robustness, impact and capacity in the social
sector, and requires enhanced impact measurement from all participants.
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Why should governments invest in social innovation?
Policymakers around the world, including in the UK, are increasingly aware of the value of
social innovation when looking for solutions to intractable problems. The best solutions to
tough social challenges are often identified and enacted by the communities facing the
challenge. This belief has, in part, driven the Big Society agenda.
Many of these locally owned solutions will stay local and remain successful on a small scale,
but others have the potential to be replicated and contribute to social change on a wider
scale. It is these solutions that Impetus is interested in, and in which we invest (read more on
www.impetus.org.uk). Government also has a compelling reason to get involved at this
stage, to support the most effective organisations to get to a size where they can provide a
“best in class” solution to all in need.
Why social investment needs social innovation, and what needs to happen
The UK government aims to enable a social investment market that will bring private money
into the delivery of public services, and to improve the quality and capacity of these services.
Social investment relies on social innovation to provide a pipeline of social solutions that
produce results better than the status quo.
But the majority of social investors will not invest in social innovations before they build
significant capacity. At this stage, organisations rely on grant funding to improve and
evidence their model, extend their reach, and build organisational strength. Without grant
funding – the ultimate “risk capital” – to grow social innovations, the social investment
pipeline will largely dry up.
The government provides grant funding at departmental level, and much of it seeks to
enable social innovation. However, the SIF is built on evidence that governments are not
effective grantmakers. When governments invest through intermediaries that are specifically
mandated to scale organisations, much more value is generated. We are calling on
government to consolidate disparate grant pots, and seek the best intermediaries to identify
the most effective social innovations, and help drive their growth.
Additionally government should work with civil society, including private grantmakers and
venture philanthropists such as Impetus Trust, to develop thematic focuses. These would
concentrate both state and private grant funding on finding solutions to society’s most
pressing problems, which would benefit all those in disadvantage, as well as providing a
strong social investment pipeline.
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Introduction
The UK Government has shown its commitment to the social investment market through the
launch of Big Society Capital, and by establishing initiatives including the Investment &
Contract Readiness Fund, and the Social Incubator Fund. Indeed, with the creation of Big
Society Capital and the development of the world’s first Social Impact Bond in
Peterborough, the UK is seen as a global leader in enabling social investment. The most
significant challenges going forward are:
In February 2010 the
US Government
launched the Social
Innovation Fund (SIF),
a programme that
combines public and
private sector
resources to grow
promising community
organisations that
have evidence of
results in three
priority areas:
economic
opportunity, healthy
futures and youth
development.
(i) to ensure that the opportunities available to social investors provide
innovative solutions to social problems, and genuinely promote
social good
(ii) to ensure that the Government, public sector organisations, the
private sector and civil society are working in partnership to scale
the highest-impact social innovations and meet the social need.
In February 2010 the US Government launched the Social Innovation
Fund (SIF), a programme that combines public and private sector
resources to grow promising community organisations that have
evidence of results in three priority areas: economic opportunity,
healthy futures and youth development.
Paul Carttar, the first Director of the Social Innovation Fund and a notfor-profit expert with a wide range of experience in philanthropy,
business, government and academia, left the organisation last month.
Before he left, Impetus sought his insights into the first two-and-a-half
years of SIF as well as the successes and the challenges for the future.
It presented an opportunity to reflect on how we might learn from the
experiences of SIF in order that the UK government, (alongside private
philanthropy) uses its own funding in the most effective way to allow
social innovation to flourish, and a robust social investment
marketplace to follow.
NURSE FAMILY PARTNERSHIP: A CASE STUDY
It is this model of developing, testing and scaling up social organisations that the
US Government is replicating through the SIF.
In America, over 500,000 babies a year are born into poverty. They have fewer
life opportunities, are less likely to gain a good education and are more likely to
become involved in crime. It is likely their children will continue this cycle.
However, one intervention that changes these outcomes is the Nurse-Family
Partnership (now being delivered in the UK as the Family-Nurse Partnership).
Nurse-Family Partnership is a maternal and early childhood health programme
that supports first-time, low-income mums and their babies. Its home visitation
programme was developed in the 1970s and introduces vulnerable first-time
parents to maternal and child health nurses. This programme allows nurses to
deliver the support first-time mums need to have a healthy pregnancy, become
knowledgeable and responsible parents, and provide their babies with the best
possible start in life.
Randomised controlled trials in three locations proved the positive long-term
impact of the programme, which ranged from 79% fewer premature births to
50% reduction in language delays in toddlers to 59% fewer arrests in 15-yearolds. By the late 1990s the Nurse-Family Partnership was ready to scale up and
found support from intermediary organisations, including the Edna McConnell
Clark Foundation and Invest In Kids, that focus on scale and impact, and
provide technical support and expertise to the best social solutions. Nurse
Family Partnership now reaches 25,000 children in 41 states. The philanthropydriven scale up and 30 years of clinical data caught the eye of the federal
government and its 2010 budget called for $8.5billion over 10 years to make
the Nurse-Family Partnership programme accessible to every low-income
mother in the United States.
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How it works
SIF is a government initiative designed to get robustness and capital into the social
innovation marketplace. In just two-and-a-half years, it has awarded $137million of federal
money, which has been matched with $350million of non-federal and private funding. It is
intended to improve the lives of people in low-income communities by funding
intermediaries that provide grants to social organisations in its three priority areas.
The SIF’s funding flows through intermediary organisations, which are selected through open
competition. The SIF’s intermediaries are mandated to offer not-for-profits support, usually
consisting of funding, management support, and pro bono expertise, to develop
infrastructure as they grow. Intermediaries are held accountable not only for growing
organisations but for reporting and evaluating their results. SIF’s focus on strong evaluation
criteria, not as an afterthought, but as one of the principal objects of the fund, is critical for
government. Paul Carttar says, “Innovation is not just about ‘new’, it’s
Paul Carttar says
about ‘better’”. For this to be true, evaluation has to be at the heart of all
“Innovation is not just efforts to judge innovation, and back the best models.
about ‘new’,
it’s about ‘better’”.
Paul Carttar acknowledges that not all not-for-profit organisations have
advanced evaluation processes when they first receive funding. He talks
of the requirement for organisations to show how they plan to improve
their evaluation:
i) Preliminary evidence – this draws on existing literature and measurement to show a
strong likelihood that an organisation’s intervention will work
ii) Moderate evidence – this produces qualitative and quantitative evidence that a client
group participating in an intervention is experiencing positive outcomes
iii) Strong evidence – this produces proof (often using methods such as randomised
controlled trials) that these positive outcomes are attributable to the intervention, and not
to other factors.
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Rather than building new government infrastructure, SIF relies on outstanding grantmaking
intermediaries to select high-impact community organisations through open competition.
This strengthens existing civil society infrastructure, rather than trying to replace it. It requires
each federal dollar granted to intermediaries to be matched 1:1 by the grantees and again
by their sub-grantees with money from private and other non-federal sources, thereby
leveraging taxpayer dollars and strengthening local fundraising. There is emphasis on
rigorous evaluations for accountability and to enhance the catalogue of proven approaches.
There is also an explicit mandate to enhance the grant programme by capturing and sharing
practical knowledge and tools to advance social innovation more generally in the not-forprofit sector.
The grants that SIF makes to individual intermediary organisations – typically venture
philanthropists, or grantmaking foundations – are for amounts not less than $1 million and
not more than $10 million per year. SIF is permitted by legislation to use up to 10% of its
funds to award grants directly to not-for-profits. However, Paul Carttar comments that SIF
has not exercised this right, nor does he expect it to, because of the tremendous value that
intermediaries have been proven to add in growing and steering the non-for-profit
organisations.
To be eligible to receive a grant from SIF, intermediary organisations must propose to focus
on improving measurable outcomes in one of the three thematic areas and they must have
an evidence-based decision-making strategy. They must run open selection processes to
make sub-grants of SIF funding and match funding to community organisations that will use
the funds to replicate or expand proven initiatives, or support new initiatives, in low-income
communities. These sub-grants must be of a sufficient size and scope to enable the
community organisations to build their capacity to manage initiatives, and sustain replication
or expansion of the initiatives. Sub-grants made to not-for-profit organisations must be for at
least three years and for at least $100,000.
To be eligible for a sub-grant, not-for-profit organisations must obtain 1:1 matching funds
from state-level, community or private sources, demonstrate they can sustain the initiatives
after the sub-grant period concludes, be committed to the use of data collection and
evaluation for improvement of the initiatives and be important contributors to knowledge in
their fields.
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Changing the face of philanthropy in the US
SIF provides intermediaries including venture philanthropists, and grantmakers, with cash
grants when (for foundations and trusts) they are usually reliant on their existing endowment
and do not have access to additional funding. In this way, SIF is a significant new incentive
for large foundations to give growth capital and capacity building grants to not-for-profits.
This shift from foundations as designers of programmes that contract execution out to notfor-profits to foundations as providers of growth capital to the
The SIF is driving
performance-driven not-for-profits represents a fundamental change, and
alignment across is taking many traditional grantmakers in the direction of a “venture
public and philanthropy” model. In tandem with this, and also analogous to venture
philanthropy, private match funders who want to be involved are
private funding.
compelled to fund scale up and whole organisations, not just specific
programmes and projects.
The US federal government is explicitly interested in effective social
innovations reaching a scale where it can step in to provide funding and an “exit strategy”
for philanthropy. Here the example of the successful scaling of Nurse-Family Partnership is
helpful. The government did not prioritise Nurse-Family Partnerships when it was a small,
local programme but once it had gained scale via the intentional provision of philanthropic
growth capital from, amongst others, Invest In Kids and the Edna McConnell Clark
Foundation it could see the contribution it could make to large-scale change across the
country and was prepared to replace philanthropy with federal funding.
The SIF is also driving collaboration, and encouraging philanthropists and the not-for-profit
sector to embrace a culture of knowledge-sharing and transparency. This is apparent in the
requirement that sub-grantees must be committed to the use of data collection and
evaluation systems and be important contributors to knowledge in their fields. It also
requires that when making grantmaking decisions the grantmakers consult with a diverse
cross-section of community representatives, including individuals from the public, private
and not-for-profit sectors. Finally, the SIF is driving alignment across public and private
funding, with federal, state, community and private funds being directed at the three areas
chosen by SIF as priorities: economic opportunity, healthy futures and youth development.
Successes and insights
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The programme is still in its infancy and Carttar emphasises that the most noteworthy
achievements are in the foundations that it has laid, and the changes it has made to the
social innovation ecosystem. A strong portfolio of 19 intermediary grantees serving both
rural and urban communities across the three thematic areas has been created through
three highly competitive annual selection processes.
Intermediaries chosen in 2010 and 2011 have already selected 198
community-based organisations through their own open sub-grant
competitions. The four grantees selected in 2012 are currently running
competitions to identify their sub-grantees and this process will close
soon. When the new grantmakers were announced it was also
announced that continuation grants in excess of $33million were to be
made to existing grantees.
Even unsuccessful applicants for intermediary grants have reported
finding the process helpful as it includes two external reviews, which have
informed their future development. For example, Carttar cites changes in
behaviour, such as more open selection processes, strengthened
programme models, and greater emphasis on evidence by some
intermediaries that participated in the initial grant competitions but did
not receive awards.
The most important
element has been
the intermediary
organisations...
they are kickstarting a wider
movement of
funding focused on
results and impact.
The latest government figures show that the $137million in federal funds awarded has
leveraged nearly $350million in additional funds from private and other non-federal sources.
The intermediaries and sub-grantees have secured commitments from more than 150
private funders, including private foundations, community foundations, corporations and
individual philanthropists.
There is some concern that the match requirement on funding is set very high at the subgrantee level. Although overall it has been successful, with around $2.5 being leveraged for
every government $1, some sub-grantees found it difficult to generate the match,
particularly those in rural areas or amongst charities dealing with unpopular subjects.
However, most agree that the requirement forces the not-for-profit organisations to capitalise
on the opportunity presented by SIF funding to engage new funders and build their
fundraising capacity for the long-term.
Match money is also subject to the same exclusions as all federal money granted to
charities, including that it cannot be spent on fundraising. The Federal government was not
willing to relax this rule for the SIF, but being able to use these funds to help secure a
pipeline of future funding would have been helpful so a small amount of flexibility would have
been appreciated.
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SIF has experienced difficulty operating within the context of the US federal budget cycle,
which is decided on a year-to-year basis. Decisions to grant the SIF its allocations have
been made within the financial year in question, which has meant funding competitions
have been carried out without certainty of having the funds to allocate.
Westat, one of the foremost research and statistical survey organisations in the United
States, has been chosen as SIF’s evaluator and the first report, due in spring 2013, will
evaluate the results of the first 11 intermediaries chosen. Each grantee from 2010 and
2011 has defined its overall evaluation strategy and is working with each sub-grantee on
similar strategies.
Anecdotally, Washington policymakers say that the SIF is increasing awareness of and
discussion about the key concepts underlying social innovation, such as looking to
communities for robust solutions, the potential societal benefits of finding and expanding
the very best of these solutions, the need to learn more about how best to grow them
without diluting their impact, and how to get government to step back and play an effective
enabling role.
There is an expectation from policymakers that the SIF will indirectly influence other
organisations, especially intermediaries and large-scale funders of not-for-profits such as
foundations, wealthy individual donors and the federal government itself, to adopt key
practices that enable greater impact. From the SIF’s inception, President Obama explicitly
expected its approach to change the way in which federal government “did business” with
a range of stakeholders. With their vastly bigger budgets, state departments could
transform the chances of effective social innovations scaling up and becoming the norm,
if they use the intermediary model, and purposefully make growth and scale-up their goal.
SIF has been a truly collaborative way of government working with civil society. In Paul
Carttar’s view the most important element has been the intermediary organisations. There
is a feeling that they are kick-starting a wider movement of funding focused on results and
impact and that the debate around these is getting more sophisticated. There is an annual
convening of all the intermediary organisations involved, which has been very positive and
useful. The online Social Innovation Fund Knowledge Network is used by intermediaries to
raise questions and solicit the advice of their peers.
WHAT CAN THE UK LEARN FROM THE
SOCIAL INNOVATION FUND?
Funding the scale-up of innovation
Policymakers are more and more aware that social innovation can be the key to solving
social problems. We are facing many tough social challenges and we need to find creative
ways to solve them that are better than what is currently on offer to the majority. The best
solutions are often identified by the communities facing the challenge and are owned and
championed at the grass roots. Recognition of this has been a key impetus behind the Big
Society agenda.
Many of these locally owned solutions will stay local and remain successful on a small scale,
but others have the potential to be replicated and contribute to social change on a wider
scale. It is these that the government (and Impetus) is interested in; communities have
undertaken the time-consuming and challenging stage where the thinking, start-up and
testing happens. It is at the stage when an organisation or idea is ready to be scaled up that
external support is often needed. This is what Impetus offers with our potent mix of funding,
management support and pro bono expertise.
The UK government has recently put in place initiatives aimed at incentivising private finance
to fund the ultimate scale-up and delivery of successful social innovations, through social
investment. These include:
• Big Society Capital provides investment capital to social investment intermediaries that
invest in and support social organisations operating in key defined areas.
• The Investment and Contract Readiness Fund (ICRF) is managed for the Government by
the Social Investment Business. ICRF provides grant funding to social ventures with the
purpose of growing their capacity to receive investment and be able to bid for public
sector contracts. It provides them with funding and capacity-building support. Capacitybuilding support must come from one of 18 approved providers (including Impetus Trust)
that receive a direct payment from the ICRF fund.
• The Social Incubator Fund is managed for the government by Big Lottery Fund. It will
provide resources to social ventures that incubate and accelerate early-stage social
ventures so they are in a position to apply to the ICRF. It will also improve signposting
between stakeholders so that more investments are made in early-stage social ventures.
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• The Social Action Fund is managed for the government by Social Investment Business.
It is a £20million grant fund that aims to inspire organisations to create and promote new
social action opportunities that allow people to give their time, assets, knowledge or
specific skills.
• The Social Outcomes Fund was launched by the Cabinet Office in November 2012,
and is providing £20million of top-up funding to Local Authorities and other
commissioners seeking to develop and commission Social Impact Bonds across a
range of public services.
We welcome these commitments; in various ways they will help build infrastructure, as well
as the capacity of organisations to take on social investment.
We believe, however, that the sums involved are insufficient, and that the Government needs
to make more grant funding available that is explicitly aimed at scaling proven social
innovations, at a point before they are able to take on private finance. It should also work
with private grantmakers and venture philanthropists to develop consensus over, and longterm support for, the areas in greatest need.
When grants are
given through expert
intermediaries with a
mandate that they
build capacity, they
are a route to
sustainability, and a
key part of building a
marketplace of
Private grant funding is one of the very few sources of support for both
very early stage innovation that is by definition high risk, and social
innovations that have proved their model and need support building
capacity and scaling delivery. It is currently difficult for social innovators at
these stages to access any government funding. But this funding is vital
for a healthy innovation pipeline. Without a healthy pipeline of proven
social innovations, the social investment market will not grow. More
importantly, society will lose out on solutions to problems that currently
mire millions in disadvantage. It is therefore extremely valuable that, in the
absence of government support, private grantmakers, particularly venture
philanthropists, are trying to fill the gap. However, more resources must
be directed towards this if the need is going to be met.
investable social
Much of the rhetoric around social investment cautions against the use of
innovations. grants. The recent Social Investment Readiness Charter, published by the
Cabinet Office, Big Society Capital, BIG and Nesta, posits that “the
preference within the investment readiness ecosystem is for funding
mechanisms that minimise distortion of the social investment market’s ability to deliver longterm, sustainable impact”. However, the document concedes “that grant funding may be
required in some circumstances to accelerate the development of the ecosystem.”
When grants lead to dependency and “cliff-edges”, as has happened in the past, they are
indeed bad for the social sector. But when grants are given through expert intermediaries
with a mandate that they build capacity, they are a route to sustainability, and a key part of
building a marketplace of investable social innovations.
We believe the sector must embrace the core principles of social investment, but we urge
caution in how quickly funders, particularly government, move to “non-grant mechanisms”.
They should only do so when non-grant funding can be demonstrated to be a more effective
use of resources to achieve the intended social impact. Government, and the social
investment community, need to better understand the role of grantmakers and venture
philanthropists in a maturing social investment market before reducing grant funding or
cutting it completely on the assumption that front-line organisations can readily switch to
social investment capital. Furthermore, for some organisations or activities, grant funding
may continue to be the only and best form of funding.
Social innovation needs to be proven before social investment is sought. Social investors,
who may accept reduced financial expectations, would also expect financial risk to be
commensurate with risk and social impact. They may not want to (or be able to) fund social
innovations that have low levels of financial sophistication, or that are not yet advanced in
outcome measurement. If grants are not available for these organisations, we will damage
the pipeline of future investable social innovations.
In the private sector angel funders invest equity in start-ups but in the social sector there are
restrictions on private ownership that mean that equity funding is not
possible. Grants by private philanthropists, particularly those using
venture philanthropy principles, are crucial for both catalysing innovation
and bringing it to a point where it is proven and ready to scale. More
government grantmaking is also needed here, but should be delivered via
intermediaries.
The potential of social investment to deliver transformational change will
not be realised unless enabling grant funding, combined with technical
expertise, and management support, is provided. Without it the only
organisations able to absorb investment capital are those that are already
established and proven, and not those that are in the process of
developing or growing new solutions to tough social problems. Ironically,
this innovative market could become distorted because of a dearth of
innovation.
The potential of social
investment to deliver
transformational
change will not be
realised unless
enabling grant funding,
combined with
technical expertise,
and management
support, is provided.
Rather than reducing grantmaking as a matter of principle, we need:
(i) Government to consolidate its grantmaking, and direct it explicitly towards funding the
scale up of social innovations, through expert intermediaries
(ii) Private grantmakers, and venture philanthropists, to align at least parts of their
grantmaking with the objectives of government social investment financing initiatives to
catalyse more social innovation, move existing innovations forward, and get more
organisations on the conveyor belt to scaling their innovations. Grants can be used to
help shape ideas into a business model ready to proceed through the process of
incubation, capacity building and investment.
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For grants to play a beneficial role in scaling up innovation, and not encouraging
dependency, it is imperative to move organisations away from grants once they have served
their purpose. This is where intermediaries like Impetus reveal their value: from day one, our
grants, and expertise, are used to build financial capacity, diversify and strengthen funding
There is a distinctive
role for intermediaries
to provide grants that
build infrastructure
and provide technical
expertise to scale up
an organisation and
migrate it away from
grant dependence.
sources, and develop business plans with long-term sustainability at their
heart. There is a distinctive role for intermediaries to provide grants that
build infrastructure and provide technical expertise to scale up an
organisation and migrate it away from grant dependence.
Against the context of the government’s £600million “big bet” on social
investment, grants should be seen as catalysts to drive an organisation’s
ability to take on investment. Rather than looking at an either/or model,
we must develop a mature culture of blended funding where grants and
investment work together.
The importance of developing thematic focus
One of the SIF’s characteristics is its thematic focus. All grants made to intermediary
organisations and their sub-grants to community organisations must focus on America’s most
disadvantaged communities and fall within the areas of economic opportunity, healthy futures
and youth development. SIF themes are aligned with federal priorities for social development,
and the not-for-profit organisations that receive grants are reaching sections of the community
that traditional government interventions may not always reach. SIF is not charged with
strengthening the whole of civil society; it is focused specifically on strengthening the parts of
civil society that help the federal government meet its own priorities.
The UK government is beginning to look at how civil society can deliver on its priority areas.
In 2011 it created the wholly independent grantmaking charity, Education Endowment
Foundation, which is managed by Impetus Trust and The Sutton Trust and is dedicated to
raising the attainment of disadvantaged pupils in English primary and secondary schools. Its
vision is to break the link between family background and educational achievement and it
dovetails with government policy in this area.
Civil society organisations are also developing thematic approaches. For
example, investments made through Big Society Capital must fall within
areas such as financial inclusion, mental health and social cohesion. Big
Lottery Fund’s new strategic framework sets out three headline UK themes
of community learning and creating opportunity, promoting community
cohesion and safety, and promoting well-being. Thematic focus builds
expertise in grantmakers, and venture philanthropists, and creates
opportunities to leverage funding – most importantly it recognises that not
all problems can be solved at once, and concentrates the impact of
available resources.
There is the
opportunity for
Government and civil
society to collaborate
more effectively and
do much more to
consciously align or
develop joint
At Impetus Trust we also adopt a thematic approach to our investments,
strategies that by
because we believe that this increases the impact our support can make.
working together will
The Reducing Reoffending Initiative was launched in 2009. The UK
more effectively
government spends over £11bn annually for prisons, prisoners, offender
management and reoffending costs, yet over 60% of adult prisoners are
target disadvantage.
reconvicted within two years of their release. Research has shown a stable
job reduces the likelihood of reoffending by up to 50%. Our Initiative
identifies organisations that have a proven record of reducing reoffending and have the
ambition to transform their impact. These organisations receive strategic funding, hands-on
management support and pro bono expertise to build their capacity in key areas.
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Funders of the Impetus for Reducing Reoffending Initiative include the Esmée Fairbairn
Foundation, The Indigo Trust, The Henry Smith Charity and J Paul Getty Jnr Charitable Trust,
who recognise that in order to help scale “winning models” in this difficult arena, their funding
can make a significant difference when combined, and given through Impetus. As well as
The UK government
building the capacity of the organisations within the portfolio, the Initiative
also acts as a forum for collaboration. For example, Prison Radio
could make greater
Association worked with Shannon Trust to publicise a peer-to-peer literacy
programme. After the joint campaign there a 21% increase in prisoners
use of its convening
wanting to become mentors and a 90% increase in those wanting to learn
role, including calling
for private grants to
fund innovation and
scale up that is
aligned to the
priorities of
government grants
and social investment
themes.
to read.
These examples are leading the way - there is the opportunity for
Government and civil society to collaborate more effectively and do much
more to consciously align or develop joint strategies that by working
together will more effectively target disadvantage.
As we have seen in the US, greater alignment between government and
civil society strategies has the potential to leverage deeper and more
strategic private sector engagement. With SIF, one of the drivers of
successful private sector engagement has been the notion that the US
government is providing an “exit strategy” for philanthropy and that private
funding can contribute to and accelerate government strategy. Meanwhile
the match funding component has ensured that private money is providing
an initial boost to government priorities.
There is an opportunity for the UK government to do more to leverage private sector
investment and more explicitly call on private funding to match its commitments. There is still
great untapped scope to encourage more co-investment and match funding in the UK, both in
terms of private and public grant funding of innovation, and private and philanthropic social
investment.
The UK government could make greater use of its convening role, including calling for private
grants to fund innovation and scale up that is aligned to the priorities of government grants
and social investment themes. This would create a powerful platform for government to
regularly send signals to private funders about issues and geographic regions it deems as a
current priority for funding. Private funders could then commit match funding at a thematic or
regional level that could readily be leveraged by government initiatives. In this way the private
funders could choose to more strategically deploy their money as match funding for priorities
jointly identified by government and civil society, rather than towards disparate initiatives.
The alignment of government and private grantmaking would have two additional benefits.
Firstly, by clearly signalling the government’s areas of long-term interest and activity, it will help
social investment financial intermediary organisations to bring together and coordinate major
stakeholders. Secondly, as previously argued, it will help create a broader and stronger
pipeline of investable organisations for social investors.
Finally, government should commit to consolidating many of its disparate
grant streams, possibly at departmental levels, into larger funds that can be
targeted at identifying and scaling up solutions to the UK’s most pressing
problems. SIF’s example provides a compelling argument for using expert
intermediaries to select these solutions and to work intensively with them to
build capacity. Traditional government grantmaking has not built capacity
and scale, and there is no evidence that it can do so. Indeed, this is the
reason the SIF was created – because government is often bad at
extracting value from grantmaking, and at leaving organisations more
sustainable than they were before.
SIF’s example provides
a compelling argument
for using expert
intermediaries...
Traditional government
grantmaking has not
built capacity and
scale.
The use of intermediaries in the Investment & Contract Readiness Fund
and Social Incubator Fund acknowledges this, but the majority of UK
government grantmaking does not use intermediaries. Paul Carttar is
explicit about the distinct value for taxpayers’ money that intermediaries bring to government
efforts to scale proven innovation. It is crucial that UK government, beyond the Cabinet Office,
discovers this too.
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Recommendations for policymakers
Impetus is not calling for the Social Innovation Fund to be replicated, wholesale, in the UK.
The model is not without its challenges, and has had to work in the challenging
environment of one-year funding constraints. Additionally, the greater amount of private
philanthropy in the US makes finding match funding at the sub-grantee level more feasible
than it might be in the UK.
However, exploring the SIF has led us to develop the following recommendations for
policymakers in the UK. If social investment is to genuinely enable the delivery of better
public services, rather than just easing the pressure on public finances, then it must be
able to draw on a pipeline of brilliant social innovations. The SIF shows us how government
and private grantmakers, including venture philanthropists, can work together to sustain
this pipeline.
1) Consolidate disparate grant funding “pots” into a single fund (or funds at departmental
level), explicitly dedicated to scaling up successful social innovation.
2) Widen the growing use of intermediaries, and match funding, to extract best value for
money from government grant funding.
3) Explicitly recognise the role, and value, of grants (including those given by private
philanthropists) within the social investment chain.
4) Develop thematic focuses in areas where social innovation is needed, and align
government and private grantmaking, including venture philanthropy, with these. In our
decade of experience, we have become ever more convinced that the best results are
yielded when the public, private, and social sectors work together to scale up the best
innovations. This partnership working is crucial to developing a social investment market
that can truly provide social and financial returns.
About Impetus
Impetus pioneered venture philanthropy in the UK a decade ago. Our venture philanthropy
package consists of unrestricted funding, hands-on management support from an Impetus
investment executive, and in-depth pro-bono specialist expertise from the private sector.
This combination helps expand the number of people our charities help, and the depth of
their impact. Our goal is to break the cycle of poverty and disadvantage in the UK by
supporting and scaling the most effective solutions to this cycle.
We have supported 25 charities and social enterprises since 2002, and currently focus our
support in three areas: Reducing Reoffending, Early Years and Youth and Social Opportunity.
In partnership with the Sutton Trust, we co-manage the Education Endowment Foundation,
a £135million initiative established by the Department for Education to boost the attainment
of the most disadvantaged children.
To discuss anything in this paper, and to find out more about Impetus, please contact Jenny
North, Director of Policy & Strategy
[email protected]
020 3551 7047
Impetus would like to thank Paul Carttar for generously giving his time during two interviews.
We would also like to thank the policymakers and grantmakers who attended the
Roundtable event hosted by Impetus, at which Paul Carttar spoke. Their insights have
informed this briefing paper.
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