A rapidly growing sector of the economy's main motive isn't profit -- are they mad?
Is it possible to be successful in business and have a social conscience at the same time? Most people would say it is, but increasing numbers of people are managing to combine the two simultaneously through social enterprise.
So what, exactly, is a "Social Enterprise"? The simplest definition is a business trading for a social purpose. Well known social enterprises include Cafédirect, The Big Issue, The Co-operative Group and the Eden Project.
I first came across the concept of social enterprise whilst doing some work for Westminster Children's Society who operate their nurseries on a "Robin Hood" principle, charging customers what they can afford to pay whilst competing with the private sector. A recent Guardian article explained this more fully. With this model, some of the deeper thinking beneficiaries of the free market make more of a morally and socially responsible choice -- and that in itself is a free market choice -- in the same way one might buy a pack of Fair Trade coffee.
In some ways, social enterprise exists in the hinterland between private, public and charitable sectors - though many organisations meeting the definition have charitable status. The Social Enterprise Coalition is the UK's national body for social enterprise and helps publicise the concept as an alternative way of doing business -- and is a good source of ideas for anyone starting out in this way.
The sector is growing rapidly; social enterprises account for 5% of all businesses with employees and contribute £8.4billion per year to the UK economy - almost 1% of annual GDP.
So What?
So what's all this got to do with investing? Well not a lot yet, but that is beginning to change. An increasing amount of private equity finance finding its way to these organisations from venture capitalists such as Bridges Community Ventures who are unashamedly in it to make money, but who lay down certain social criteria -- such as being based in the most deprived areas in the UK.
This venture capital company, "with a social mission," is in the process of raising its second community development venture fund, and aims to put the skills and experience of private sector venture capital to work to help deliver regeneration in some of the most run-down parts of the country.
That's fine, but what about the small-scale private investor who wants his/her money to make a positive difference to the world -- and also hopes to make a reasonable return?
Currently, the scope is limited, but this could change in the not too distant future. Bridges said: "We do see a growing demand for socially positive investment products for the retail market and it is something that we may explore in the future."
Social Enterprises that have raised bonds or equity from the public include Cafédirect (fair trade coffee) and the Ethical Property Company (which provides flexible office space for not-for-profit organisations).
I suppose the ultimate dream is a separately-listed social enterprise stock market. For the time being, though, a deposit at Charity Bank or Triodos can be a great place to put some of your savings and know that it will be invested in charities and ethical businesses. Triodos offers an ISA. They both also have deposit accounts which attract Community Investment Tax Relief.
