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CAF Venturesome

Charities Aid Foundation

OUR PREDICTIONS FOR 2019

1 February 2019
 
Following on from 2018's social investment predictions and in an attempt to establish tradition; I’ve ransacked the CAF Venturesome cupboards (it took all of January) and dusted off the crystal ball to offer up 9 predictions on the social investment market for 2019

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And in no particular order, the predictions are:


1 Growth spurt

Securing financing can be a crucial milestone for any organisation as they journey through the business cycle and most will share anecdotes of the difficulties in successfully completing an investment round. This pain is perhaps felt more acutely for younger social organisations. According to 2017 data from the Department for Digital, Culture, Media and Sport and Department for Business, Energy and Industrial Strategy, there were just under half a million social enterprises in the SME population, of which approximately 93% have less than nine employees.

The demand for support for early-stage development is significant and is partially fulfilled by the likes of Bethnal Green Ventures, School for Social Entrepreneurs and Young UnLtd. There are, however, new kids on the block: Social Finance with its new £10m accelerator programme looking to launch this year, or Big Society Capital’s Early Action approach, to “develop and scale innovative ways to prevent social problems and improve the lives of vulnerable children and elderly people”, materialises further. Furthermore, one hopes to see more dedicated support from social investors towards helping social ventures avoid the “death valley” as they exit accelerator programmes.


2 Big data

This remains a prominent item on the agenda, especially around using data to better understand and improve the use of social investment in the market. Perhaps we can harness the powers of the likes of Google or Facebook in collecting, using and managing data to achieve better social outcomes.


3 The B-word (not that one)

Blockchain was first invented by Satoshi Nakamoto as a technology to support Bitcoin and other cryptocurrencies in 2008. A decade later, it has now developed into a household name (evidenced by my mum calling to ask about investing in blocks). The technology is diffusing into the mainstream, with uses in banking, healthcare and international aid, to name a few.

Expect to see an explosion of blockchain-based technology platforms striving to address systemic inefficiencies across the board. And of course, this also applies in the social investment market, from improving the due diligence process for both investors and investees, or the access to a large amount of accurate real-time data could finally standardise the measurement of impact in the sector. But be wary of "blockchain-washing", as evidenced by a small-cap company previously called the "Long Island Iced Tea Corp", which saw its share value double when it announced a name change to "Long Blockchain Corp".



4 The washing continues…

Is impact washing the new green-washing? There's no denying that the market for impact investment is growing at a considerable pace. The GIIN’s most recent estimate for the minimum size of the global impact investing market doubled to $228 billion in assets under management over the last year. 

Traditional investors ranging from pension to private equity funds are increasing, including impact investing as part of their investment approach. As the market develops, how do you curb misuse of the term “impact”? The IFC published its consultation draft of 13 principles of impact investing towards the end of 2018 “with the intent to contribute to measurable positive social, economic, or environmental impact, alongside financial returns”.

Perhaps this is the year where a global definition of impact and/or social investment can be set, and more importantly, standardised when it comes to measuring and monitoring impact for investors and investees.

5 Are you ready?

With the increasing amount of capital flooding the social investment market, expect more focus from social investors on providing additional non-financial support for the sector to ensure the intended impact is delivered and organisational resilience is improved. Instead of investment readiness, we expect people to prioritise organisation readiness in the near future.


6 Pushing the boundaries

Shamelessly plugging a recently published paper on the use of philanthropic capital for social investment (co-authored by Holly Piper, Head of CAF Venturesome), we expect more discussions and debates on this topic, and even clearer guidelines from the regulators. With an eye-watering asset base of £65bn (held by the top 300 UK charitable foundations according to ACF), relative to the £2.3bn social investment market in the UK (according to BSC data), the large inflow of risk-bearing capital could significantly alter the shape of the market.

7 Mixing it up

As the market draws in additional interest from an increasingly diverse range of funders and investors, the opportunity for more collaborative working presents itself in many ways. Blended finance in the form of using public, philanthropic and private capital to support socially-minded projects will grow and stem into perhaps more innovative financing solutions.


8 Alternatives

The rise of alternative platforms to fund social causes is set to continue. The tech-savvy millennials are not only the largest generation at this moment in time, but they are also the most ethically-minded. Alternative routes of financing such as crowdfunding (came into prominence in the late 2000s) or peer-to-peer lending (started with a UK-based company, Zopa, in 2005) encourage mass participation, and also begs the question whether social investors could play a role in facilitating these transactions?

9 The other B-word

And of course, the list isn’t complete without the mention of Brexit remaining a political uncertainty and widely expected to have a negative impact on the UK economy. Charities tend to be squeezed at both ends when there is a bear market as funding becomes scarcer but needs increases. The likely outcome would be an additional need for social investment to play a key role in supporting social organisations as they transition to the new status quo.


And that's it for us predicting the future this year.   We'll take a look back again in 2020.


If you would like to talk to our team about how social investment can help you sustain and grow your social impact. Call us on 03000 123 300 or email us at venturesome@cafonline.org and we’ll be happy to chat with you.

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