How social investment can work for you

Geetha RabindrakumarGeetha Rabindrakumar is head of social sector engagement at Big Society Capital (the UK wholesale social investment organisation). She has worked in a number of finance roles in the voluntary sector and was previously finance director at the disability charity Scope, where she led on the set up of their social investment bond programme.

There has been a great deal of debate in the sector around the potential opportunities that social investment can bring to enable charities to grow and transform their services. It was great to see the level of interest in social investment at a breakout session at Evolve 2014 in June.

Charities facing significant challenges sustaining their activities in the current environment need practical information so that they can determine how and whether social investment could work for them.

Important questions asked by charities

What are the differences between regular investment and social investment?

Social investment is repayable finance, provided to charities and social enterprises to generate both a financial return and social return for the investor.

  • Social investment may be cheaper than obtaining commercial investment (for a given level of financial risk), because of the motivations of social investors.
  • Social investors may be more patient and flexible in their approach and terms.
  • Social investors can often bring skills and experience to help your organisation’s success that may not be available from mainstream investors.
  • There are some ways of investing (eg in social impact bonds, community shares) that are specific to social investment.

What are the risks of taking on social investment?

The main risk is that the activities funded by the investment don’t generate the income you expected and your organisation has difficulties in repaying the investment. This is mitigated by the work your charity and the investor would do to review the proposal and assess its risks. Good governance, ongoing monitoring and dialogue with the investor is key to managing this risk.

There is also the risk that the social impact may not be created as expected. Effective monitoring should let you manage this risk and adjust your intervention. If your charity is piloting a new intervention and the social impact is not generated as expected, your new found experience will inform your future work and will still be valuable.

Finally, the risk of not taking the opportunity to develop or transform your services may be a greater risk to achieving your mission than the risks associated with taking on social investment!

How can we use social investment?

Social investment can be used to:

  • develop new sources of income generation, eg fundraising and trading
  • providing working capital to deliver contracts
  • funding the set-up of new services.

However, successful social investment needs to support projects that will lead to income generation in order to pay back investors – always keep this in mind when thinking about how to use social investment.

We have created a product for market but lack opportunity/access to market? How can we use social investment to do this?

Generally, social investment does not create the opportunities to take your services to market, but can fund the development of your services after you have a clear plan to secure a buyer.

You may need support to help develop the marketing of your product, before thinking about how social investment could be used to finance your product delivery.

We are a public sector organisation with a charity arm – how can we take advantage of social investment?

Your charity arm could access social investment to develop its activities like any other charity – for example by getting a loan from a social investor.

However, public sector spin outs can also access social investment to develop their activities in many cases – you may want to investigate this possibility.

Are there any programmes to support charities that want to investigate using social investment?

The Social Investment Business is delivering a programme on behalf of the Big Lottery Fund called Big Potential, which can provide support to build capacity to take on social investment of up to £500k. Charities are able to apply to this fund.

Where can I find case studies?

Most social finance providers and advisers will have case studies of social investment on their websites. Some sources of case studies can be accessed via Charity Bank and the Social Investment Business.

More general information on social investment and organisations that provide social finance can be found on Big Society Capital’s website.

For charities who would like to find out more about social investment, you can leave a question below or contact me (grabindrakumar@bigsocietycapital.com).

Resources

The Big Lottery Fund offer a guide called ‘Social Investment Explained’. It gives an overview of social investment for charities.

This entry was posted in Practical support and tagged , . Bookmark the permalink.

Like this? Read more

Posts written by guests who have contributed to NCVO projects and events.