Social investment

This work builds on findings from our 2013 study into charities and social investment on behalf of the Charity Commission, which highlighted the need for improved mutual understanding between investors and investees.

We found that motivations for engaging with social investment were generally to support organisational survival or strategic change. We concluded that charities needed independent advice, help with business planning, peer learning and access to simple social investment products. Link to the full report.   

Today, the importance of hearing and fully understanding what it is like for a charity to receive social investment is unchanged. Access to finance from any source is tough. Social investment products and processes, while improved, remain complex and complicated for small and medium-sized charities. Future policy and economic prospects for many of these organisations and their beneficiaries are bleak. At the same time, the Government has reaffirmed its commitment to social investment and announced new policy and fiscal measures to support this.

There were three main reasons for concentrating on small and medium sized charities, which we defined as registered charities with an income under £1million:

First, small and medium-sized voluntary organisations, including registered charities, total 62,789 in comparison to 4,273 large and major organisations in England. Therefore, they merit consideration as a significant market segment in their own right. Recent research from National Council for Voluntary Organisations (NCVO) and Institute for Public Policy Research (IPPR) tells us that, overall, smaller charities have lost proportionally more income than larger charities; have undergone substantial income fluctuation/volatility; and that the smaller the charity, the more they have lost in income from local and central government. The small and medium-sized charities we have spoken to share this experience. They have felt blown about by changes in local authority contracting and commissioning arrangements and by turbulence in the policy contexts of their particular work. This includes changes in the criminal justice system and potential and actual changes to housing and other welfare benefits.

Second, our review of the literature on social investment told us that the experience of large charities that receive social investment, and of charities that make social investment, is relatively better understood and more ‘visible’ in debates about social investment than that of small and medium-sized charities. This gap in research means that the voice of small and medium-sized charities as potential investees is largely absent from discussions about their participation in the social investment market. One way in which this gap is being addressed is through the recently created national body, Access – the Foundation for Social Investment, which has as its mission to bridge the gap between charities and social enterprises on the one side and social investors on the other, to help make social investment easier to find and more relevant for charities and social enterprises.

Third, we wanted to capture the voice of the ‘established’ voluntary sector and their experience of social investment alongside grants, donations and public sector contracts. Concentrating on registered charities enabled us to do this.