Government has been the biggest source of finance for the social investment market so far. Central and local government, alongside other public sector institutions, have provided finance through various repayable grant and loan funds. A key consideration for government is the link between finance and delivery of public services and policy initiatives, such as payment by results.
Trusts and foundations also provide some finance for social investment. They generally invest between £200,000 and £5m on a long term, patient basis. Trusts and foundations want their investments to achieve social impact and transformational change alongside some financial return.
Individual retail investors will invest small amounts of money (£10 to £50,000) into FSA-regulated and authorised social banks. They tend to look for security of capital through the Financial Services Compensation Scheme, competitive rates, access to funds and a clearly articulated and reported social impact.
Wealthy individuals will invest amounts of between £50,000 and £2m in a portfolio that mixes a diversified approach to investment in SIFIs with direct investments into specific social sector organisations. They tend to look for financial returns linked to investment/social impact risk. They also look for some access to funds, engagement and a direct, personal link with the social impact being delivered.
Mainstream banks and commercial institutions are beginning to enter the social investment field. However, most of this funding is through their corporate social responsibility (CSR) programmes. Among the UK high street banks, tentative entry into the social investment market is mainly through signposting services for high-net-worth individuals or secured lending alongside other social banks. This activity is dwarfed by their mainstream lending activities.