First published on Philanthropy Impact 

Last week we published the first Social Impact Report for the Resonance Bristol SITR Fund. The Fund is investing in social enterprises in and around Bristol under the broad agenda of “dismantling poverty”.

It uses Social Investment Tax Relief (SITR) to align the needs of investors and social enterprises needing investment. SITR is a similar tax relief to the Enterprise Investment Scheme (EIS), providing investors with an immediate 30% income tax deduction on their investment into a social enterprise. Together with interest on the loan, this provides investors with a good risk-adjusted return on investment, and the enterprises with an affordable cost of capital. A number of SITR funds have been launched since the relief was introduced in 2014, allowing investors to access a portfolio of such investments.

But how can investors also meaningfully assess the impact that their investment is having ? This is a question which the impact investment community (those who intentionally seek positive impacts, environmental and social, from their investments) has been debating for some time. One is not able to provide a “silver bullet” to this problem – approaches may validly differ across different forms of impact investment and the requirements of different investor types. But below are three reflections from the work on this first report.

Start with the social enterprise – by starting with identifying good examples of social enterprise, and the forms of investment they need, investment can be better targeted on the roots of complex problems and some of the innovative and su

stainable approaches being developed to address them. The implication of this “demand-led” approach for impact measurement is that this should be tailored to the specific approach (or “theory of change”) which that social enterprise is using to successfully address the problem, rather than the imposition of a generic target. For example, in another context, our homelessness property funds focus mainly on measuring the factors which homelessness charity partners tell us are effective in helping formerly homeless people progress – more access to the private rented market, progress towards employment, and resilience against homelessness from social connections – rather than just the number of people housed. This may compromise a bit of comparability of impact across funds, but it gives greaterassurance that the impact of that fund is on track, and can provide valuable information to adapt the strategy if necessary.

Use an appropriate framework – In the case of the Resonance Bristol SITR Fund, the ambition for an investment fund to contribute to “Dismantling Poverty” is clearly a big ask. It’s already been amazing to see the diversity of impact models which the first five investees are using to attack different aspects of this hugely complex problem – from using the power of sport to reach out to marginalised young people, to arts, journalism, food retail and drug / alcohol therapy. To think coherently, over the long term, about how these diverse initiatives contribute to the overall issue of poverty, this fund is using the Sustainable Livelihoods Approach as a framework to assess how specific initiatives contributeto the “assets” which poverty erodes in individuals: skills, relationships, access to goods, finance and the environment. Other frameworks exist, for example the Sustainable Development Goals, and will be suitable for different initiatives.

Place matters – many social problems have a regional emphasis, and social enterprise often grows up in regional networks as a response. Our SITR funds, and others like Social Investment Scotland, therefore root themselves in specific regional geographies, with local investment teams who can themselves become a part of the social infrastructure of the region – building relationships with local organisations, making investment decisions from a local perspective and staying close to investees as they grow. The impact of such a fund is often therefore as much about the connections it can make – between enterprises, business support providers, impact initiatives – as the investment itself: so its important to measure and report on that connectivity as well. For example, the Bristol SITR Fund runs an annual “marketplace” event, attended by both investors, intermediaries and the social enterprises in the portfolio, which allows investors to get a direct exposure to the impact of the investees, and further connections to be formed. Over time, this means that investors can see a coherent impact in that region, whether it is one which they wish to back due to personal connections, or simply part of a diversified portfolio of regional impact investments.