Money is at the centre of many discussions about the future of social innovation in Europe, but the money is the easy part. Foundations, intermediaries and governments can play important roles in supporting social innovation, beyond providing the Euros. In this small discussion at the final Social Innovation Community event in Seville, we brought together a diverse group of people to explore how to unlock sustainable and effective finance and support, and we discussed how we could all help each other to build a stronger market for social innovation?
The biggest problem related to social innovation finance is that resources are going the wrong way, not that we don’t have enough. The social challenges we face today demand different kinds of resources. Traditional responses are not fit for purpose. There is no one solution. We need to leverage more human and financial capital, and we need to bring private capital onto table even, if we don’t like it from value perspective. This was at the heart of our discussion at the SIC event. Below are some key things to think about if we want to create an effective financial pipeline suitable for innovation and the challenges of the future:
We need outcome driven funds
‘Funding is not a band aid to solve all problems’. The most important question to start with is ‘Why is the funding needed and what will be the use of funds?’ If it is experimental, dont look for concrete outcomes.
Make use of new tools and financial instruments for social projects, where appropriate
Projects that don’t generate revenue are not necessarily worse than those that do - they just need different kinds of funding. If project generates outcomes, there are mechanisms for that like impact bonds. We must remember to look at toolbox of financial instruments and decide what is appropriate for each project.
We need to build an ecosystem of different types of finance from different types of organisation
We should get more comfortable in bringin private money into social sector. It can help mitigate risks, so long as there is a flexibility of loans, and flexibility of grants. One of the challenges we need to address with different types of investment is around power dynamics - some projects have financial return, some have outcomes as a return. Who defines what success is The second challenge related to different kind of finance is language - across the spectrum of finance, from philanthropy, to impact investing, to public funds, we need to be clear about what we mean.
Bringing different kinds of funders into social innovation means we need to invest in capacity building
Different kinds of institutions need to understand the complexity of social innovation projects - there is no one size fits all. So from public institutions to foundations, we need to change the way institution work. Innovation means that the result is not necessarily known at the beginning of a project, so flexibility,k adaptivity, experimentation, learning and trust need to become embedded in the way all institutions work and they way they commission services. If we want to build a functioning market, the most important part is alignment, a systems approach, and communication.
And in order for this to happen….
A cultural change is needed, both within institutions, but also in grantees and fund receivers
Foundations and funders can not embed these things without looking at their own principles. Funding innovation requires funders to be innovative themselves. We dont know the outcomes at the end of an innovation project, things change and evolve, so funders can expect projects to be exactly as they predicted at the beginning. Funders need to be more flexible.
This all means that funders need to think about their roles differently. They can do more more than just provide money. They can mobilise other capital, influence new policies, experiment with new mechanisms, provide in kind support, and become partners. In the next 10 years, our institutions will have to drastically reshape themselves, and the social innovation community will be there to help them do it.