Carrying on our tradition (3 years in a row!), our investment officers, Hadley and Alex share what they believe will be important trends in social investment for 2020.
The Climate Crisis
2019 felt like a big year for public, governmental and corporate awareness of climate change. The challenge for 2020 will be to take the momentum and commitments from 2019, planting more trees, electric cars and becoming carbon neutral, forward into policies that can be delivered. At CAF Venturesome, we believe social enterprises and charities can play a big part in addressing climate change, having already supported organisations such as Hubbub who have been at the heart of the recent momentum on climate change.
Social enterprises driving change
“Capitalism in Crisis?” was the title of Social Enterprise UK’s 2019 State of Social Enterprise Report looking at how social enterprises can tackle some of the social and economic issues we face today. The report identifies that social enterprises are more likely to be led by women than small to medium enterprises more widely, have a higher proportion of Black, Asian and minority ethnic leaders and directors compared to the population as a whole, and the majority of social enterprises work with individuals facing disadvantage. We expect the social enterprise sector will continue to grow throughout 2020, with new exciting enterprises sprouting up, disrupting the way existing businesses operate and driving fundamental change.
Brexit uncertainty will continue
Although the EU Withdrawal Agreement has now been signed, uncertainty surrounding Brexit remains as the UK and EU engage in talks over a trade deal with the deadline of 31 December 2020. We expect to see both challenges relating to existing EU funding agreements but also potential opportunities as details of the new funding that the Government has committed to, including the Shared Prosperity Fund, are released.
Keeping it Local
There will be a growing move towards local investment in line with the Government’s commitment to levelling up and investing to reduce regional inequalities combined with a £150m Community Ownership Fund to encourage local groups to takeover community assets that are under threat. Our place-based Social Enterprise Assist Fund (SE-Assist Fund) works with local businesses, the community and the public sector to help local social enterprises with interest free loans. And our new Community Led Housing Fund (CLH Fund) supports all forms of community-led housing schemes all over the UK.
Using more money from dormant bank accounts
In 2018 the Government committed to using £330m in dormant bank accounts to support the social sector. Fair4All Finance was launched in 2019 to use some of these funds to provide affordable credit. 2020 is likely to see further progress made on creating a sustainable solution to this acute consumer issue that impacts the lives of many immigrant and/or lower-income UK households.
We also expect to hear how the Government will allocate a further £2bn held in dormant shares, bonds and pensions, although we realise this make take longer to do.
Subsidy for social investment
The role of subsidy (essentially grant funding) in the social investment market continues to be a topic of discussion and 2020 is likely to bring further clarity around the structure and scale of future subsidy. Taking a step back, over the past several years the government has used subsidy to stimulate supply of funding, mitigate risk and strengthen charities in a variety of ways, whether via Big Potential, or Access Reach, Enterprise, and Growth funds. Each of these funding pots addressed strengthening the organisational and financial resilience in different ways, from supporting the development of enterprising ideas to subsidising investment funds to incentivise them to make riskier loans. Given that these pots have been/are due to be spent by 2021, significant data around the effectiveness of these funds continues to be collected and the sector eagerly awaits further reporting around ‘what/where/how’ subsidy will be utilised moving forward.
Social investment infrastructure
The sector has made significant strides over the past few years in building and strengthening the support activities that enable us to build a sustainable industry and we believe those efforts will continue in 2020. Sector forums and other infrastructure-building initiatives help us form ‘connective tissue’, and grow and standardise our evidence base, which is hugely helpful in moving the sector forward and realising our collective aims of helping third sector organisations deliver impact.
A few, but by no means all, of the efforts to keep an eye on include: the re-vamping of the Social Investment Forum (2019/20), seeing further results of The Connect Fund’s investments (a pot of funds set up in 2017 to invest in efforts to enhance the social investment infrastructure), and the work of the Adebowale Commission supported by Fusion 21, which will examine the current state of the market and make recommendations about what needs to happen to better meet the financing needs of social enterprises. As active participants in market building efforts, CAF Venturesome sees 2020 as a great opportunity to strengthen dialogue among the wide array of sector stakeholders, and help shape the future funding environment for vital social sector organisations.
Impact investment growth
Our final prediction relates to the groundswell of support for and interest in impact investing. The Global Impact Investing Network (GIIN) now estimates the global impact investment market to be £502bn, with 64% and 21% of these assets being managed by asset managers and foundations, respectively. The Government appears to be committed to making the UK a leader in this space, evidenced in part by the creation of the Impact Investing Institute in 2019, which serves to ‘accelerate the growth and improve the effectiveness of the impact investing market.’
While the spectrum of investment considered in ‘impact investing’ is vast, and CAF Venturesome remains committed to serving mission-focused social sector organisations, we view the seismic shift in focus of individuals and companies around the world to consider the social and environmental impact of their investments as a positive, long-lasting trend.