The story of social investment:
I’m not sure why social investment and impact funds are replicating the models and approaches of mainstream financial sector.
Part of the problem preceding the crash in 2008 was the abstraction of the financial markets from the vast majority of people and their lives.
The wider the gap of understanding between ordinary people and the financial whizz-kids of Canary Wharf and Wall Street, the more dangerous it becomes.
For social investment to reach its potential (in other words, to itself to create a positive social impact on the financial system) we need to ensure that it is understandable and relate-able to the majority of people who have put their money into the system in good faith.
As consumers we’re demanding more and more control about the decisions we take to aide a better form of capitalism, a better kind of society.
But paradoxically, we seem to be repeating the same mistakes we made in the lead-up to the crash — the products, services and tools we use are abstracted in layers of obfuscation, complexity and “secret-sauce” algorithms (the financial services equivalent of the Colonel’s secret recipe for KFC fried chicken).
In a world of such overwhelming complexity and white noise, the next generation of breakthrough products are the ones that will offer simplicity.
Just look at Warby Parker and Tom’s Shoes. I’m aware that these two companies are in serious danger of getting case-study-itis from the social impact space’s interest in them. But the most compelling aspect of their story of how they create social impact is in the blunt simplicity of their “one-for-one” narrative.
Buy a pair of shoes, and another pair are donated to a community in Africa.
Buy a pair of glasses and support a community in the developing world to improve access to eyewear.
Instantly understandable, aligned with what the company does and perfectly pitched as a sustainable way to help people buy buying something you want anyway. Sounds good to me.
Contrast that with the narrative of social / impact investment: invest some money for a lower financial return than in a commercial fund, and you’ll create some social impact as well. No, we’re not sure how we measure this social impact or how far YOUR money specifically goes towards this impact but we’re working on it. Basically, it’s complicated OK but we’re very nice and we have some people who used to work in mainstream finance in a big bank to do the money stuff for us.
We need a better narrative for social investment.