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CAF Venturesome

Charities Aid Foundation

Reflections on our 2019 social investment predictions

13 December 2019


As 2019 is coming to an end, we look back on 2019’s social investment predictions and reflect on this year’s developments. Consider this an early Christmas present!

Boat at sunset with 2019 painted on it

1 Growth spurt

Prediction: additional capital and support for early-stage social ventures

There has been an increasing number of academic institutions supporting social innovation programmes in-house, but often only up to the proof of concept stage. This obviously isn’t the parachute that social ventures are still searching for to glide over the “death valley”. This continues to be a segment of the market that is under-served, with the list of funders remaining largely the same.

There continues to be much discussion around the provision of affordable, flexible and patient capital in the marketplace and is something that we, at CAF Venturesome, are pondering over – watch this space!

2 Big data

Prediction: using data to better understand and improve the use of social investment

Data remains an important tool in gaining a better insight into how we (social investors) are serving the market. The Social Economy Data Lab (run by SIB with support from Power to Change & the Connect Fund) was set up in the hope of accessing market data to share best practice and influence fund designs. There is still much to be done in this area but hopefully more solutions will pop up as issues are identified (e.g. Singlify founded to improve the investment process for social organisations).

3 The B-word (not that one)

Prediction: blockchain-based technology becoming more prominent in the market place. Be wary of “blockchain-washing”!

The volatility attached to cryptocurrency seems to have deterred some interest from the FX element of the market, but the underlying technology which supports this is still of great interest. This is demonstrated when Alibaba used it to power its biggest shopping day on record ($30bn sales in a single day). While the technology is picking up momentum under a commercial setting, its functionalities are still being explored within the social sector.

4 The washing continues…

Prediction: standardised definition of social / impact investment and framework for social impact

Impact washing, as discussed by Morningstar’s Hortence Bioy here, damages the reputation of firms involved and confidence of investors. Recent efforts to mitigate against this comes from the International Finance Corporation (part of the World Bank Group) with its framework of 9 principles designed to bring greater transparency, comparability and rigour to the market. CFA UK also launched its first ESG qualification* which is an attempt of providing a centralised platform for would-be fund managers, but not to be confused with social / impact investment…

With the launch of Impact Investing Institute, we are optimistic in its focus on highlighting best practice and provision of education for mainstream investors looking to enter the market. In the meantime, we (at CAF Venturesome) find the EVPA distinction of “investing for” vs “investing with” impact particularly helpful. (Nov-18 EVPA report: “Impact Strategies – How Investors Drive Social Impact”)

* and four members of our team took their ESQ qualification this year

5 Are you ready?

Prediction: more non-financial support post-investment

This is still an area that is under-served by social investors and can certainly take some lessons from many grant funders out there providing the additional support required to reach organisational resilience. At CAF Venturesome, we had just completed our 4th round of our annual SE-Assist programme in Wales which offers non-financial support alongside interest-free loans up to £30k for social organisations based in the area. We also recognise that more should and can be done in this area and will use the learnings from the programme to explore further.

6 Pushing the boundaries

Prediction: broadening the use of philanthropic capital for social investment

With an increasing level of interest from trusts and foundations in social investment, the use of philanthropic capital in the sector is becoming more prominent, especially in its use under equity / equity-like form. In order to understand the need better, CAF Venturesome, in partnership with Shift and UnLtd have commissioned for a piece of research to assess the level of demand in the market. Keep an eye out for more on this in the New Year!

7 Mixing it up

Prediction: more "blended finance" coming up!

Established in 2015, the Access Growth Fund reached the mid-point of deploying its £50m this year, with c. 13% of total investment given as grant. As this pot of funding depletes, it begs the question of what’s next for market-level blended finance and how crucial of a role it has had in the market. At CAF Venturesome, we had tested our own blended finance offer through the CLT Fund II this year which saw 7 local housing groups supported through more financially viable schemes.

8 Alternatives

Prediction: rise of alternative routes of financing (such as crowdfunding, peer-to-peer lending)

2019 has seen more social investors and crowdfunders working together to support impactful projects, in some cases where social investors would underwrite a community share issuance or vice versa (for example). As the alternative financing market continues to grow, and competition for funding intensifies, project funding will become increasingly diverse. At CAF Venturesome (again), such an example exists when we had worked with Ethex in the last year to support St Ives Community Land Trust with building affordable social housing for the local community.

9 The other B-word

Prediction: Brexit (the never-ending saga)

And last but certainly not least, a plot twist in the Brexit saga: delays, delays and a General Election. This, of course, creates additional political uncertainty for the charitable sector and economy as a whole. Moving forward (and assuming that Brexit eventually happens), we should focus on the remit of the UK Shared Prosperity Fund, which had been set up to replace EU structural funding after Brexit. There is still a lack of clarity on the funding allocation – could the social investment sector come out on top?

 

So, there it is; our look back at 2019 in the world of Social Investment.  As we head towards the holidays, may we wish all of our investees, funders and supporters a very Merry Christmas and Happy New Year.

Christmas 2019


If you want to know more about a social investment from CAF Venturesome or want to use your philanthropic capital to support our fund, talk to our team on 03000 123 300 or email us at venturesome@cafonline.org and we’ll be happy to help.


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