Glen Saunders: Draw social investment to lay NZ's foundations

Glen Saunders. Photo / Supplied

Opinion

New Zealand and Australia have lagged behind the United States, the United Kingdom and Europe in developing an extensive social enterprise sector financed by specialist social investors.

Overseas, a large number of social enterprises are involved in many different areas.

Eco and affordable housing, ethical property, sustainable agriculture, renewable energy and energy saving, sustainable transport, education, health care and social services are just some of these areas.

These are social businesses - generating income, using business-like approaches while delivering fundamental social and environmental value.

To mainstream business they look like charities, but to charities they look like businesses. They are much more than mainstream businesses with good corporate social responsibility: social values are fundamental to what they do.

This has created a vibrant sector. And it has generated a network of social banks, loan funds and social investors that provide the capital these social enterprises need.

They have specialised in their approaches, understanding and products. Most raise money from the public and are social businesses themselves.

They are secure and stable and provide realistic returns. During the financial crisis they were resilient, as they avoided fast money. In fact, some have seen substantial growth as the public seeks a secure alternative to mainstream banks.

This has not happened here to nearly the same extent. Most organisations with a social purpose are charities largely dependent on a fundraise-and-spend model, and most funding comes from grants and donations.

This is the right approach for some activities but for many it limits their scale and development. This is beginning to change and new social investors are being drawn in.

Some of the larger trusts and foundations are beginning to provide loans, as well as grants and donations.

The Tindall Foundation and ASB Community Trust commissioned a major report in how this might be done. The Tindall Foundation is now lending actively. One of their borrowers, the New Zealand Housing Foundation, has taken on substantial social loans to increase the scale of their activity.

Interest among other funders is high, particularly within Maoridom, and has been further stimulated by a recent Axford Fellow report.

Real change in this area will depend on finding people with the right capacity to build up the sector.

Combining business skills with strong social intentions is not always easy, but the rewards for savers, investors and borrowers, and New Zealand as a whole, will be substantial.

* Glen Saunders is director of Prometheus Finance.

ON THE WEB

www.tindall.org.nz/information-research/#Social

www.fulbright.org.nz/voices/axford/2010 - benedict.html

www.prometheus.co.nz