How can Investors tackle structural inequality - the Equality Transformative Tool

By Chris Blues, Programmes Director and Paulina Kowalke, Programme Manager

Dec 16, 2022

Diagram: Diagnostic tool: identifying a venture’s equality transformative potential

Over the last 6 months, we have been holding some key questions — how can Social Tech Trust, as an impact investor, identify and support ventures that challenge inequality and create alternative approaches designed to promote equality (sometimes referred to as equality-transformative*)? Is it possible to invest in ventures that aim to tackle the root causes of inequalities and drive systemic change?

Impact investing is becoming more established, and we know it can drive change and influence systems. We also know that inequalities are worsening across society and that the lack of equality underpins many social and environmental challenges. Perhaps, by intentionally backing ventures that foster equality transformation, investment can step up to the complex, intersectional challenges we face.

At Social Tech Trust, we have invested more than £30 million in organisations that scale impact, guided by the foundational principle of fostering equality for underserved and marginalised people. We seek to move beyond solely optimising within the current system and towards nurturing ventures that have the potential to tackle issues at their root causes, work across the multiple levels needed for systems change, and break the negative cycle of inequalities many people face.

Ventures can contribute to system-wide shifts through both what they do (i.e., their products and services) and how they operate (i.e., their practices, processes, and culture). To explore this topic, we have conducted a collective enquiry and brought together key practitioners across multiple sectors: systems change, equality transformation, impact investing, human rights, and social entrepreneurship. This project was carried out in partnership with the Equality Impact Investing Project, the Connect Fund and nine social tech ventures.

What did we learn?

Principles and practices of equality transformative ventures

We identified three principles and four practices that helped us identify ventures that have equality transformative potential. These principles and practices were present amongst the ventures we consulted and have been validated by practitioners in impact investing, equality transformation, and systems change, as well as by the ventures. By listening to ventures and founders, we built a diagnostic tool for impact investors. The tool consists of two elements:

I. Principles of ventures that have equality transformative potential: These principles are at the core of the venture and must be present for it to have transformative potential. Only if the venture has evidence of all three principles do we proceed to analyse which practices are present.

The three principles are:

1. Intent

2. Influence, and

3. Intervention

II. Practices of ventures that strengthen their equality transformative potential: The four practices are complementary to the characteristics.

The four practices are:

1. Bringing voice

2. Demonstrating reflective practice

3. Navigating towards transformation, and

4. Role modelling change

The principles allow for the identification of ventures fostering equality transformation, whereas the practices provide guidelines for understanding the depth and advancement of their equality transformative potential. The more advanced the practices are, the higher their potential is.

Principles deep dive

1 - Intent: The venture is actively addressing inequality.

To have the potential to foster equality transformation, we found that ventures need to be intentionally seeking to tackle the drivers or causes of inequality, and this is explicitly part of their mission or purpose.

The venture has a strong grasp and awareness of the inequalities it is addressing.

It can express the interconnections and drivers that create inequality, as well as the interactions that enable it to persist. It can position itself to address that specific inequality. In addition, the venture understands the challenges and flaws within the current system.

2 - Influence: The venture influences resources to advance equality over the long term.

Tackling inequalities isn’t easy, and founders face more challenges than traditional ventures, for example, long sales cycles, a scarcity of aligned funding, and target users who are often not paying customers. Founders are simultaneously seeking product/market fit in the current system whilst driving towards a new preferred system. They are seeking to influence, change people’s attitudes and introduce new ways of doing things — this takes time.

We found that ventures often start their entrepreneurial journey by seeking to mitigate the impacts of inequality, for example, by supporting people experiencing it or influencing those in positions of power to address it.

We also found that founders demonstrate a long-term commitment to their mission, and alignment between the venture’s mission and founders’ personal values is key. Founders often pivot their solutions to align with their mission, and there is evidence that founders are fixated on the inequality problem, rather than their specific solution. To have potential, the founders should have a track record of being, or show potential to be**, adaptive, persistent, and build collective power for a prolonged period.

3 - Intervention: The venture’s intervention tackles negative cycles of inequality.

The intervention often fits into at least one of these categories, it either:

• Changes social norms or attitudes, for example, how people are seen or treated

• Directly reduces the impact of the inequality

• Addresses how people manage inequality, for example: being more confident, self-aware, able to challenge and make life-style choices

By scaling their intervention, the venture increases its potential to operate at more points within the system, for example, by building collective power, challenging unequal power structures, influencing policy, or changing social attitudes.

Practices deep dive

1 - Bringing voice — The venture puts the voices of end-users and those with lived experience at the forefront of strategy, culture, and their product/service. The venture learns from lived experience and challenges its assumptions.

2 - Navigating towards transformation — The venture drives positive, lasting change towards equality (i.e., equality transformation) while also prioritising sustainable income and addressing short-term inequality challenges (i.e., equality mitigation).

3 - Role modelling change — The venture proactively models the change towards equitable practices it wants to see across its own organisation structure, governance, management and leadership practices, including recruitment and staff development practices.

4 - Demonstrating reflective practice — The venture values reflection and continuous learning to refine its approach to tackling inequality. It recognises that transforming itself is crucial to transforming inequality and is willing to adapt based on customer and beneficiary needs.

How did we do it?

Working in partnership, we took a consultative approach and aimed to hold our assumptions lightly. We ran a set of focus workshops and one-to-one venture conversations to translate the equality transformation strategy into practice, with the aim to ensure that our insights are informed by ventures’ day-to-day realities and are applicable to real-life scenarios. 

We set out to:

• Create something useful and practical for impact investors — a tool that can help identify ventures that foster equality, transformative potential, and help make informed decisions when carrying out due diligence on seed-stage ventures.

• Ensure the consultation process was inclusive and empowering for the ventures — to bring diverse perspectives, move away from extractive behaviour and ensure we challenged any potential affinity bias. Quite simply, we wanted to learn something new and be open to unexpected outcomes.

We selected nine diverse ventures that work across industries, geographic markets, technologies, and equality contexts. The nine ventures we worked with were:

1. Mind of My Own — Creating accessible apps that advance universal children’s rights.

2. On our Radar — Amplifying stories of marginalised communities for social change.

3. Rights DD — Providing modern slavery risk due diligence technology.

4. AutonoMe — Delivering a virtual support designed to improve the lives of people with learning disabilities.

5. CityMaaS — Making the world accessible, online and offline for Disabled people.

6. Helsa — Improving mental health and wellbeing in the LGBTQ+ community, as well as other minority communities.

7. Good Boost- Providing affordable and accessible therapeutic exercise programmes, through cutting-edge technology.

8. EduKit — Empowering each child to access relevant support before issues escalate.

9. SEO London — Preparing talented students from underserved and underrepresented backgrounds for career success.

conclusion

Equality transformation is a multifaceted problem which requires collective effort across many actors in the system, including impact investors and ventures. A venture alone will not drive systems change, but an individual venture can play a significant role in moving towards a more preferable system and influencing others along the way.

We have designed a toolkit that builds on the characteristics and practices outlined above. The toolkit, alongside our How-to guide, will enable you to identify and support seed-stage ventures that have the potential to foster equality transformation. In addition, the toolkit can serve as guidelines for ventures seeking to develop their ability to foster equality transformation, as well as a tool for portfolio management.

Click here to access the Equality Transformative Tool.

Click here to access our How-to guide.

We are continuing to refine the tool and our approach, and we welcome further collaboration. If you’d like to discuss this work further or receive a copy of our diagnostic tool, please email: hello@socialtechtrust.org.

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*Equality transformative organisation strengthens or creates systems that support equality by tackling inequality root causes and generating alternatives; source: C. Goddard, O. Dowsett, K. Miles, 2019; “Equality Impact Investing: From Principles to Practice.”

**When considering a ‘track record’ it’s important to value lived experience and ensure it’s appropriately evaluated.