Charities Focus on Social Investment as a Finance Tool

(3BL Media/Justmeans) – Over the last two years the social investment market in the UK has continued to grow by about 30 percent a year. There has been a rising interest in social investment as a new finance tool to help charities become more sustainable and grow.

To address the issues facing the charities and their motivation for using social investment as a new tool, Cass CCE has published a research report, Social Investment as a New Charity Finance Tool: Using both Head and Heart. The report highlights a major shift in charity funding models away from grants and donations, towards social investment and more borrowing in the next five years.

The findings of the report come from two years of in-depth research involving 120 face-to-face interviews, a large social investment symposium and an online questionnaire. The findings are directly relevant to charities and would also be of considerable interest to investors and intermediaries wanting to engage with this market.

According to the report, 60 percent of all charities are positive about social investment, with 17 percent saying it could transform their business models. The research estimates this shift towards social investment will account for approximately 11 percent of funding, equivalent to around £4bn–6bn capital for the sector.

The market for social investment continues to build at a rate of 20 to 30 percent a year and has reached around £1.5bn capital, according to the latest figures from Big Society Capital. However, one of the barriers for charities using social investment as a funding tool is their lack of understanding about it. Some charities feel conflicted about using borrowing or investment tools and others have ethical concerns.

Mark Salway, Director of Social Finance and Social Investment at Cass CCE, said that social investment can be a powerful tool to help address social issues and fund the charity sector, especially where there is clear alignment of motivation between charity and investor. Charities need to develop robust financial models that will support social impact and the creation of a sector fit for the challenges ahead.

Source and Image: Cass CCE