Doing decisions differently

Social investment on a new mandate

In this blog, we introduce the “Vested” project, and our desire to test new approaches to decision-making in the social investment space.

What does it take to make the social investment sector more fair?

We’re seeing lots of discussions around this centre on the need for better access to the sector. There are big efforts currently to build connections between investors and communities traditionally excluded. For instance, organisations are building local infrastructure and networks and launching funds targeted at diverse audiences. We think this is crucial, and we’re part of it.

However, alongside these steps, we know that we have to question the broader reasons that certain communities receive far less money than others. And one reason for this is that the dominant approach to making decisions in the sector often doesn’t recognise the value of ideas coming from underserved communities. We want to extend the work we’re currently doing about this in the Growth Impact Fund with our new project, Vested, which emerges from the following questions:

• How can we develop new approaches to participation within social investment that better value diverse business ideas?
• Within these approaches, how might we deliver power to those close to the impact of investment decisions?

The root of exclusion: who has legitimacy to make decisions?

When considering why certain decisions can exclude people, it’s helpful to think about the idea of legitimacy — who has the “right” to make investment decisions? According to a popular narrative, it’s financial experts that have this right. These are people who have:

• Qualifications in business or finance
• Experience in highly technical work, like financial modelling
• Time spent in the banking sector

There are many good motivations for this (after all, there’s a reason such professions exist). And we too believe that the financial insights of people working in these professions are a crucial input to good investment decisions. But they are not the only input. And we question how far we can change the outcomes of decisions in the social investment sector without rethinking the question of legitimacy and what else it demands.

How can we make more legitimate decisions?

There is a growing consensus that legitimate funding decisions need to incorporate the views of those close to the impact that those decisions will have. This stems from beliefs that:

• Communities have a collective ethical right to influence decisions that influence themselves
• Those who experience a social issue understand it deeply, and are better placed to solve it
• Incorporating wider viewpoints can lessen inequalities of power and resource

Beliefs like this are driving innovations in grant-making. A range of “participatory grant-makers” like Camden Giving and Two Ridings Community Foundation are working to bring communities into decisions about where money goes to solve local issues. And this approach has also seen a resurgence within government spending and policy decisions — for example, in participatory budgeting and citizens assemblies.

We’re now looking to bring the same approach to social investment, where financial expertise still dominates decision-making. Our new project, Vested, will build on promising early steps in the sector such as BD Giving’s Grow Fund, and seeks to explore what happens when we:

1. Bring people with lived experience into the centre of decision-making
2. Give people the power to design their own approach to investment decision-making

To do this, we’ve worked with Trust for London to identify a pressing social issue in London — unemployment for young adults. With the support of the Connect Fund, we have recruited six young people close to that issue to help invest up to £300,000 in the organisations seeking to address it (more on how we’ve done this in an upcoming blog).

We’ll be supporting this panel to design and implement their own process for deciding which organisations should receive investment. This means that we’ll provide them with resources, support and expertise, including access to Trust for London’s own investment team. And the panel will use this to shape their own investment criteria and brief Trust for London on the information they require to make good decisions, rather than being called on at the end of the process to provide their perspectives.

We think this ability to shape the decision process is important to protect its legitimacy. This supports people to exert genuine and authentic influence, and lessens the likelihood of being led into “business as normal” by a decision-process shaped by existing power holders, and stacked to favour more of the same. In our next blog, we’ll share more about our decision-making model, and how this is emerging from reflections on where power sits in the sector, and what might be needed to shift that.

What’s next?

Across the project itself, we’ve formed two broad learning questions that we’re keen to answer:

1. What conditions and supports enable a group of people with limited/no experience in investment to come to an investment decision about a social issue they are close to?
2. In what ways can sharing decision-making power with those close to social issues support social investors to have a wider reach and deeper impact?

If you’re interested in exploring these with us or sharing your reflections on our project, please comment below. And please stay tuned to hear what we’re learning in the months ahead.