Appetite growing for social investment – among the funders

Posted by on Feb 18, 2014 in Blog, Funding, Innovation, Strategy

By Amanda Carpenter

Sitting in a crowded auditorium at Bank of America Merrill Lynch recently listening to Bridges Ventures present their report “Shifting the Lens – A De-risking Toolkit for Impact Investment.  I know that up to now many charities and social enterprises have not been keen to think about taking up the offer of private or institutional investment as it meant moving from a grant way of working to loans, which is often something our Trustees and colleagues are unhappy about. But judging by the number of people in that room last week there is clearly a large and ever growing interest in social investment.

The report produced by Bridges IMPACT + the advisory arm of Bridges Ventures LLP, focuses on making it easier for private investors to put money into bonds and funds that support impact investing. The risks are often perceived rather than actual. Although we usually only hear about the old tired “Peterborough Prison” social impact bond this is not representative of the activity and vibrancy in this market. As the seasoned financier sitting next to me said “ I am amazed at how many people are talking about this – I thought it was just something you and I discussed in the pub”. Bridges IMPACT report provides 20 examples of financial product ranging from Ecological Building Society’s Foundations Share Account through charity bonds to provide housing for people with learning disability to Microfinance Initiative for Asia: and these just represent a small sample of a growing market. The Boston Consulting Group have predicted the size of the demand for the social investment market will be approximately £750m by 2015.

So maybe we need to be sitting up and taking notice a bit more. There are opportunities out there and we would be naïve not to at least consider them. What really caught my attention was the comment by the CEO of Esmée Fairbairn Foundation who remarked that Foundations didn’t just want to be considered “dumb capital” – if the mood of grant makers is shifting towards shared investment grant models then we as charities and not-for-profits need to be shifting our thinking too.

So what can Social Enterprises and charities do to equip themselves for a new approach and a new way of working? At Achill Management we think there are three key steps to take to get you started on the journey.”  it struck me that maybe now is the time for those of us in the not for profit & social enterprise sector to have a rethink.

  1. Think differently. Try to make the mind shift from grant to loan and with that comes an attitude that sees money coming into the organisation as active finance not passive finance. What do we mean by that ? Well grant money is often dead money – it comes in, it gets spent – usually but not always sensibly and on much needed services – and then its finished. Social investment is active capital – loans get repaid and then the money can be recycled to be used elsewhere for social good.
  2. Encourage a change in your Trustee and Board thinking – this is not something CEOs can do without support and you need buy in from the top.
  3. Sift out what is and is not suitable for this kind of investment. There will always be charities and charitable activities that cannot demonstrate a social return – social investment doesn’t replace the need for pure philanthropy but it is a vital partner in helping the civil society sector achieve its core aims and purpose.

What is your Board thinking about social investment right now?  Is it even on their radar as a genuine alternative to the organisation’s sustainability?  Get in touch if we can help make sense of the issue for you.