Charities and social investment: A research report for the Charity Commission
This research into social investment was carried out by IVAR on behalf of the Charity Commission. It aimed to explore the regulatory risks, challenges and opportunities facing charities in this field and gain an insight into the likely development of the social investment market over the next five years. We interviewed a range of charitable trusts and foundations as well as charities in receipt of social investment (investees) and spoke with representatives from a number of social investment intermediary organisations. Our research found that:
- The major drivers for successful social investment by charities were a shared sense of mission, good governance, skilled management and strong relationships between investors and investees. The main barriers were concerns about financial risk and reputational damage.
- When it comes to making and receiving investment, some research participants were unaware of the charity law framework that applies to charities. Charity investees had several support needs such as independent advice, help with business planning, peer learning and access to simple and clear investment products.
- Some social investment intermediaries felt that charity investees were excessively risk-averse. However, the investees themselves felt this wariness ensured a responsible and risk-based approach.
- Social investment needs to be clearly understood by trustees. It is vital that trustees are able to make informed decisions when embarking on a particular investment. Charities trustees must exercise financial prudence and explain their decisions.
- Charity trustees need to highlight the unique nature of charitable status. Trustees should make sure that the intermediaries and partners they work with are aware of their organisational status as a charity that exists for public benefit.
- Charities should collaborate and seek support. Informal peer learning, networking and independent advice will enable trustees to understand social investment and make informed decisions.
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