By Leila Baker and Niamh Goggin
With the current focus on growing and diversifying the social investment market, particularly in London and the South East, we may risk overlooking the particular experience of charities in taking social investment. ‘Charities and Social Investment’ , a report commissioned by the Charity Commission for England and Wales from the Institute for Voluntary Action Research and written by Leila Baker and Niamh Goggin, provides an insight into the barriers and risks facing charities receiving social investment.
“It was a nightmare. I had never done anything like that before … I didn’t have a life …You just get on with it.” (Charity chief officer)
“It was an onerous time but we got there.” (Charity trustee)
Our findings suggest that advice and support for charities considering social investment is unevenly distributed across England and Wales and that its quality is variable and questionable. Charities told us that they felt quite isolated because they were not in touch with other organisations that had been through the social investment process. Many of the charities we spoke to said that they did not envisage going through the social investment process again – the investment was a one-off for purchasing a building, for example so it was hard to see how knowledge and capacity for investment would grow.. There was a perceived lack of clarity and transparency about some investors’ assessment, due diligence and reporting requirements along with a feeling that these processes were not tailored enough to individual organisations.
“What is the normal time frame for making a decision about a loan? What is the breakdown of what you will need from me? What is the process?”
However, once an organisation has secured investment, participants were enthusiastic about the annual review conducted by their lender. While they recognised that their lender’s primary motivation is to ensure that their money is repaid, they said that the combination of “a hard headed business approach and a sympathetic ear” was, nonetheless, welcome and useful. Unexpected benefits of the annual review included having someone else to talk to about the challenges involved in managing property or business contacts.
Our research also indicates that some intermediary investors do not consider charitable status to be relevant to the way they organise social investment. They show little awareness or understanding of charity regulation and guidance, as it affects both investees and investors. The charity sector appears to be largely absent from conversations about the social investment market. Our study findings suggest that there is little movement between the practical experiences of charitable investees and the theories and ideas behind the development of the social investment market.
Two of the study’s key conclusions:
- There is a need for simple social investment products that are presented to charities clearly and in accessible language, with neutral advice from organisations that are not social investment market competitors;
- Charity investors could be well-placed to lead the process of learning and sharing knowledge between charity investors and investees and charity and non-charitable intermediaries, to ensure that social investment does not undermine public confidence in charities.
To get in touch with the Institute for Voluntary Action Research, you can email [email protected]