20160601 presentation to cypriot govt on social enterprise am

UK social enterprise and investment landscape Presentation from Alexandra Meagher, UK Cabinet Office

Social Entrepreneurship Workshop, Cyprus

June 2016

The UK is leading the world in developing a more social economy

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The UK social economy is growing and diverse

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Legal frameworks have been developed to support this economy

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Our policy framework has focused particularly on developing the social investment market

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The UK social economy is growing and diverse

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Legal frameworks have been developed to support this economy

3

Our policy framework has focused particularly on developing the social investment market

Social enterprises combine sustainable business with social impact Social enterprises are businesses that trade to tackle social or environmental problems: most earn more than 75% of income from trade Social enterprises are a source of economic growth, contributing ÂŁ55bn in GVA and employing 2m people Social enterprises drive innovation: Three times from social enterprise start-ups than ordinary SME start-ups Social enterprises focus on where most needed: a third work in the most deprived communities in the UK Social enterprises deliver public services: 59% do some business with the public sector

All chart data from 2015 SEUK ‘State of Social Enterprise Survey’.

Social enterprises make up 15% of small and medium sized businesses

Social enterprises primarily trade with the general public Sources of income The most common source of income is trade with the general public

All chart data from 2015 SEUK ‘State of Social Enterprise Survey’.

Areas of activity Social enterprises are particularly concentrated in service industries

Barriers to growth Social enterprise report that the main barrier to growth is access to finance

Mainstream business is also increasingly focussed on social impact Consumers and employees

Supply chains

Investors

Two thirds of global consumers will pay more for socially driven products

Commissioners are required to consider wider social value under the Social Value Act

Nearly 80% of wealthy under 40s have made social investments

Companies like PWC, Johnson & Johnson and Zurich are seeking to make their supply chains “social”

The UK positive investment and savings market was worth £3.6bn in 2015 - up 11% on 2014

BIS SoS has a team working on business as a force for good

Opportunities at scale are emerging - £900m Cheyne Social Property Impact Fund

Millennials believe the primary role of business is to serve society

The consumer ethical market was worth £38bn in 2015 up 8% on 2014

This is alongside global debates on corporate form driven by the G8 Social Impact Investment Taskforce and the UK launch of the B Corp designation for companies delivering value to all stakeholders

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The UK social economy is growing and diverse

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Legal frameworks have been developed to support this economy

3

Our policy framework has focused particularly on developing the social investment market

Social enterprises have common features and can take a range of legal forms Generate majority of income through trading

Charitable company

Embedded social/com munity purpose

Company limited by guarantee

Obligations to report on social impact

Community Interest Company

companies

Company limited shares

Long-term protection of social/com munity purpose

Asset lock to protect community purpose

Community Benefit society

Cooperative society

cooperatives

The Community Interest Company form was developed specifically for social enterprises Generate majority of income through trading

Set up as standard company that can trade, with additional obligations as a CIC

Embedded social/com munity purpose

Identified community purpose specified in governing articles and approved by the CIC Regulator

Obligations to report on social impact

Annual CIC report placed on public record (activities and benefits to community, remuneration, pay)

Long-term protection of social/com munity purpose

If wound-up/dissolved assets must be transferred to another asset-locked body

Asset lock to protect community purpose

Statutory asset lock that says assets must be used for benefit of community; limits on distribution of dividends

Government policy supports dynamism in the social enterprise market

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The UK social economy is growing and diverse

2

Legal frameworks have been developed to support this economy

3

Our policy framework has focused particularly on developing the social investment market

Since 2010, the UK government’s policy framework focused on building a social investment market

Policy aim

Examples

INCREASING THE SUPPLY OF CAPITAL INTO THE MARKET

Creation of Big Society Capital

• Diversify investor base

CREATING AN ENABLING ENVIRONMENT FOR ACCESSING THAT CAPITAL

Social Value Act

SUPPORTING DEMAND FOR CAPITAL BY GROWING THE INVESTMENT ‘PIPELINE’

Investment Readiness Programme

• Impact on growth

• Open up markets

• Support global agenda

• Support capacity building

Current focus

The 2016 strategy is now focused on taking social investment to scale Leveraging industrial and retail capital Enabling pension holders to opt for “social funds”

Mainstreaming use across government

Harnessing the potential of mission-led business

Investing differently to leverage funding for social impact from other sources

20% of new entrepreneurs consistently say they want to make a social impact through their business

Making grants differently to build sustainable public sector markets

Growth of “profit with purpose” businesses and rise of B Corps

Commissioning differently for better social outcomes

Cabinet Office leading a Mission-led Business Review review to understand this sector better

Enabling crowdfunding for social impact

Supporting independent financial advisers to advise on financial return and social impact

Supporting slides

Example: Big Society Capital BSC has invested over £350m since April 2012, with over £140m reaching frontline organisations BSC is a wholesale fund, set up in April 2012. It is independent of government.

Invests directly in social finance intermediaries rather than social ventures, to catalyse growth of the market.

Capitalised with £600m of funds: £400m from dormant bank accounts, and £200m from the UK’s largest High Street banks Acts as cornerstone investor, developing financial products and funds that aim to provide risk and working capital to the sector.

UNCLASSIFIED

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Example: Investment Readiness Programme We have run a £30m capacity building programme supporting different stages of social ventures

Social Incubator Fund

£10m Fund for early stage social ventures Money dispersed via social incubators Up to £15k of investment and other support

Investment and Contract Readiness Fund £10m Fund for growth social ventures Ventures jointly apply with a support provider Grants of £50k - £150k for capacity building UNCLASSIFIED

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Example: social impact bonds SIBs are a tool that bring in preventative ‘risk’ capital to test innovative solutions to social issues

The provider only gets paid on outcomes (Payment by Results). This makes it hard for smaller organisations which may not have access to up front finance

This can be overcome if investors provide working capital, receiving any outcome payments that are achieved Therefore, in a SIB all financial risk is transferred to investors, and new sources of capital have been made available Cabinet Office support includes a Centre for SIBs and a £20m Social Outcomes Fund

UNCLASSIFIED

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