17 September 2014

Government shouldn’t ignore the needs of charities when it comes to social investment, says a new report released today.

Social investment is an approach with huge potential, but policy makers are in danger of focusing too much on a grand future vision and new ideas for models which promise to give investors both social returns and commercial-rate financial returns.

The reality is charities are more in need of practical, less glamorous forms of investment, such as affordable repayable finance, and investors should sometimes be prepared to sacrifice financial benefits in order to create a wider social impact, says the paper.

'Returns Policy? What the next decade holds for social investment', released by the Charities Aid Foundation, which helps people and businesses support the causes they care about, and provides financial services designed for the charitable sector, is part of their Giving Thought discussion series, and is published as the G8 Social Impact Investment Taskforce releases its results.

It also states that social investment shouldn’t just be about the super rich and government should do more to build awareness and encourage charities themselves to use their resources to invest in social impact.

CAF has been on the frontline of social investment for over ten years. Its social investment arm CAF Venturesome was launched in 2002 and has made over 400 deals, with a particular focus on the philanthropic end of the market.

CAF’s Social Impact Fund allows investors to lend money to organisations multiple times, maximising the impact of their investments and allowing them to help many charities and social enterprises.

Like the G8 taskforce, the CAF report makes eight recommendations to guide policymaking:

• Grant funding should be used to help charities build skills and infrastructure to become ‘investment ready’
• Payment-by-results contracts need to be designed carefully to work for charities and social enterprises
• Charities and social enterprises should be supported to take advantage of the new rights to challenge local service delivery and buy community assets
• We shouldn’t ignore the philanthropic end of social investment or the need for capital funding with little or no expectation of financial return beyond the capital itself
• Social investors should not be expected to subsidise private gain for commercial investors or public sector commissioners
• Charities and charitable trusts should be encouraged to consider social investment
• Local authorities should become social investors
• Companies should embrace social investment

Rhodri Davies, Programme Leader of Giving Thought at the Charities Aid Foundation, said: “It’s great that the G8 has been looking into the future of social investment and its increasing role in meeting the needs of communities and voluntary organisations around the world.

“With grant funding falling away and growing demand for public service delivery from the voluntary sector, social investment is definitely becoming an increasingly important source of income for charities and social enterprises everywhere.

“But we can’t get too carried away pursuing a grand vision of a future when the reality at the moment is that charities primary need is simply access to affordable repayable finance. This may have low returns for investors but will ultimately create the widest impact.”

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