Investing in social innovation
The UK is currently facing major social and economic challenges, at a time when public spending is constrained and economic growth is stunted. Over half of NHS spending in Britain is already on people over 65 and the 65+ population is set to rise by 65% in the next 25 years (ONS 2011); one in six young people aged 16-24 are NEET costing the public purse over £12bn (university of york 2010); and 82% of households in the lowest tenth of income distribution live in fuel poverty (DECC 2010). We know that none of the trends are declining; and these are just a few examples behind much bigger issues.
In order for us to overcome such challenges there needs to be a major shift in the way we do things. We need social innovation to bring about such change and identify ways in which we can do ‘more for less’. Nesta understands the complexity of social challenges in modern society, and importantly, we understand the need for innovation to deliver more effective products and services to address these needs at lower cost. In fact, Nesta has long been at the forefront of identifying and supporting such innovation whether through research, funding, programmes, or investing in early-stage technology.
Successful Nesta programmes such as the Big Green Challenge, Innovation in Giving and Age UnLimited have shown a range of high-impact social innovations being developed. Through this work we see the emergence of social ventures with the potential to create positive social impact while operating on sustainable and scalable business models. Nesta has supported social ventures such as The Amazings Care4Care and Cool2Care. Often technology is at the core of such innovations, tackling issues through increased collaboration, connection, information, accessibility and inclusion whilst reducing the cost of service delivery.
Innovation by nature is unproven and risky and needs finance that is willing to take this risk to enable growth. Currently the supply of risk capital to UK social ventures is small and underserved; risk capital in the UK social investment market was just over £8 (2010/11)[i]. Nesta Impact Investments substantially increases the supply of risk capital for social ventures at a time when their innovations are greatly needed. We have created Nesta Impact Investments to support the most innovative and impactful social innovations addressing our core themes – all major complex social problems for the UK. Pioneering a new approach to investing, we are looking for solutions that are socially beneficial and financially viable, and that have impact, innovation and technology at the core of what they do. Through investment we aim to grow social innovations to substantial scale, delivering impact for the people of the UK and generating sustainable financial returns.
[i] ‘Lighting the Touchpaper’, Boston Consulting Group and The Young Foundation, 2011