Are the Big Players Finally Interested in Social Impact? A New Report from EVPA

by Ruth Whateley, SIAA Manager

Last Tuesday saw the launch event of a new EVPA report ‘Social Impact Strategies for Banks- Venture Philanthropy and Social Investment’ by Dr Leonora Buckland supported by London Business School. The report provides the first guide as to how European banks are currently active in venture philanthropy, social investment and impact investment. Ruth Whateley Manager of the Social Impact Analysts Association reports on the event.

Why was I there?

I would like to say I attended this launch event with an open mind, but if I’m honest I’ve always been a bit sceptical of big banks and some of the ethically questionable practice taking place (to put it mildly). However I’m also sure the situation isn’t clear cut. What if I told you large investments from banks are being directed to essential lifesaving social and environmental projects? Would that make you think twice about the role banks play? Certainly I was intrigued by the title of the report, particularly given my work at the Social Impact Analysts Association (SIAA).

What are banks doing?

The total investment in social enterprise/social business by the mainstream banks surveyed in this report was €261 million (excluding microfinance funds).[1] These banks range from retail banks such as BBVA in Spain to investment banks such as J.P. Morgan and private banks such as UBS. The banks in the report have made some significant steps towards integrating a social dimension within their core business model and not just their Corporate Social Responsibility (CSR) programmes. For example J.P. Morgan and the Gates Foundation launched the Global Health Investment Fund of $100m in 2013 and BBVA’s Momentum social investment project has been investing €2.5m in Spanish social enterprises since 2011. The report outlined how the model of banking (retail, private or investment) can influence the type of involvement that banks can have in social impact investment as leaders/field builders, investors or intermediaries. The investor activity includes both internal venturing and external investing through direct or indirect funds and deals.

Why are banks involved?

Representatives from J.P. Morgan and Deutsche Bank on the panel identified with the variety of drivers for involvement in this field. These drivers include client demand, competitor advantage, personal belief, bank ethic and CSR interest. For me this point was very interesting. I perceive a real fear in the social sector that a private investor’s financial mission will continue to trump the social mission of the investment. And if we want to create significant positive social impact for the most at need in our society I think this should continue to be a worry. From both the event and the report it appears that one of the significant barriers to this re-prioritisation of social and financial mission is organisational culture. The report identifies that banks have much to contribute in the way of human, financial and social capital. However it hints that organisational culture must change for this work to be successful and I think it will only change by attracting more workers with social sector experience into the banking sector. This must happen alongside collaborations between banks and social sector organisations such as foundations.

Creating social impact

Another important point flagged was that social impact investment is only one way banks can create social impact. Bank involvement in grant making and other forms of philanthropy is still hugely important and should remain so for interventions that are not appropriate for social investment. Furthermore panellists mentioned if banks are serious about social impact they need to start forecasting for, measuring and analysing social impact as an integrated part of the investment process, something with which I whole heartily agree. International network organisations such as SIAA, The SROI Network, Global Impact Investing Network (GIIN) and EVPA should also continue to be championing and supporting the impact measurement and analysis cause. As understanding impact and targeting investments to social causes is supposed to be at the heart of what social impact investment is about.

What does success look like?

At the event I heard mixed messages about what success looks like for social impact strategies in banks. For some establishing a fund and convincing enough colleagues that it is worthwhile is success. For others success is something that may happen beyond our lifetimes, when banks truly take social and environmental impact into account during their work, as well as financial returns. This second view of what success looks like sits well with me, however radical some people may feel it is. I think it is still an open-ended question as to whether European banks are truly moving towards considering social and environmental impact in their core business. I really hope they are.

[1] Includes Deutsche Bank UK Impact Investment Fund; J.P.Morgan Social Finance Unit Fund; BBVA social enterprise financing through Momentum Project 2011 and 2012; BNP Paribas; ABN Amro Social Impact Fund; UBS Impact Investment Fund; LGT Impact Ventures Fund UK and Erste Bank social enterprise financing.

This blog was originally posted on Alliance Magazine and is available here.

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