The Dynamics of Financialisation: Ethnography of a Social Impact Fund

Presenting financialisation as a dynamic movement, this paper aims to understand how a particular sector of social life can become “financialised”. Based on a 3-month ethnographic observation of a European social impact private equity fund (i.e. a fund buying and selling companies that have a social impact on behalf of its investors), the paper studies social impact investing as an extension of a broader dynamic of financialisation in the funding of social and welfare activities. Then, comparing this contemporary dynamic to historical waves of financialisation, this paper develops a typology of the various factors involved in the shaping of a particular financial order.

First, this paper focuses on the way financial actors invent a business model for the financial intermediation of social action. In particular, it shows that the observed fund has to deal with two standard issues for contemporary funds whilst developing the market for social finance: raising funds from public and private investors and finding relevant investment opportunities. This paper describes how the observed fund copes with this by hybridising the traditional private fund’s business model through imports from social sector practices and social sciences (section I).

Then, studying the conflicting trends at work in the elaboration of social impact finance, this paper shows that the dynamic of financialisation is not harmonious. It outlines how the shaping of social impact finance implies choosing between different models: neoliberal versus philanthropic approach, political and public investments versus traditional private ones, and quantitative versus qualitative conception of social impact. It describes the logics of actors defending each of these different models (section II).

Finally, drawing on the historical study of previous financialisation waves (namely the dismantling of conglomerates and public companies through leveraged buyouts funds in the 1980s), this paper outlines the similarities between these dynamics. It asserts that in both cases, financialisation has been provoked by the conjunction of a singular culture (composed of financial techniques and valuation practices) with cash scarcity in the targeted sector. It elaborates on the various factors involved in the shaping of a financial order in a particular sector: individual actions and trajectories, collective mentality and valuation culture, objective institutional and monetary regime (section III).

Thus, the paper provides an original ethnographic study of the crafting of a new financial sector that has been very little documented: social impact investment funds. It also develops an innovative theoretical reflection on the dynamic of financialisation and helps with understanding how our contemporary financial order emerged.