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A new tool in the toolbox: How charities and social enterprises are using social investment
Who’s using social investment?
In our first year, just 23 organisations received social investment from funds that BSC had invested in, which had increased to over 550 by the end of 2016. BSC investments are only part of the picture, and we estimate that at least 3,500 charities and social enterprises are now using social investment across the UK.
Far from being a London-centric activity, 87% of charities and social enterprises using social investment from our funds are based outside of London. As importantly, 71% of organisations that have accessed our funds are based in areas that are in the bottom 50% of Index of Multiple Deprivation (33% are based in the most deprived 20%). This is aligned to the SEUK State of Social Enterprise survey, which consistently shows that social enterprises are disproportionately based in the most deprived communities.
We now see a huge diversity of organisations using social investment from early adopters and larger charities such as Action for Children running new outcomes based services, new social ventures such as Unforgettable delivering innovative services for people with dementia centred around users needs, through to community groups coming together to raise community shares to help take over a local asset such as Clevedon Pier. This diversity is reflected in the range of the size of investments made into front line organisations - from £10,000 to £60m from our funds.
What are they using it for?
We know that social investment can be used for all stages of development of an organisation, but is more relevant beyond the early stages – in the past this has been most commonly to buy a building through secured loans, and increasingly growth capital to scale. In the current climate, the ability to keep going is an achievement in itself, and investors such as Keyfund have provided cash flow funding to charities like Direct Help & Advice to help them to restructure and adapt their model in order to sustain their long term impact.
It’s been great to see newer approaches developed for example in the partnership between social investor SASC and the charity Family Action to share risk in funding for an outcomes contract to pilot a new approach to better support children in care.
What difference has social investment made for charities and social enterprises?
Most importantly, social investment has enabled more charities and social enterprises to make a greater difference to more people’s lives – we explore this in our Impact Report here.
But from speaking to numerous charities and social enterprises who have shared their experience, we often hear that working in partnership with an investor has brought other benefits – for example the scrutiny helping make their financial models more robust and sharper thinking about the impact they are aiming to create and how to demonstrate this.
What could have been done better?
Our impact report outlines our learnings over 5 years. The key ones have been about being relevant and understanding where people are starting from - we continue to improve how our work is shaped by user needs.
For example, our campaigns GET SITR and GET INFORMED for Boards offer practical information and resources. Our informal Lets Talk Good Finance sessions hosted by partners around the country, offer a safe space for honest discussion with peers on the nuts and bolts of the social investment experience– to get a flavour, listen here.
Supporting organisations to navigate the investment landscape which feels unfamiliar and complex to many has been one of the biggest issues we’ve faced. In collaboration with sector partners and Access, we’ve developed Good Finance which was launched this year, and many organisations have told us that they wish it had been around earlier!
For many organisations, the social investment products have not been relevant for their needs, but there is now an increasing diversity of products available, and better match to demand particularly with small loans provided through Access, and opportunities to raise investment from individuals with SITR or community share issues.
Often the organisations we’re here to support will be moving at a different pace to those in social investment – either they need quick decisions and support to take advantage of immediate opportunities, or need long timescales to develop their plans, knowledge and trusted partnerships with investors to incorporate social investment as part of their wider strategy.
And finally, there’s a glaring recognition that gaining an in depth understanding of how social investment works, and the products available is of little use unless you have a suitable revenue model that can sustain investment – colleagues will be sharing more on the data we have on different revenue models, and we’ll do more with partners to help increase understanding in this area.
Are charities more likely to use social investment now?
Five years ago, there were very polarised views on social investment from within the sector, and most being unclear on how it could be relevant to them. Our stakeholder survey in 2016 showed that 82% of charities and social enterprises felt their understanding of social investment had strengthened.
External reports have also shown us how things have moved on - CASS CCE’s research show that charities view that social investment is more likely to be a part of their strategy in the next 5 years. Encouragingly (without wanting to draw sweeping conclusions), this year’s Social Enterprise UK's State of the Social Enterprise sector survey data gives some indication that the barriers to accessing finance (eg confidence, lack of knowledge of where to go) have reduced over the past couple of years.
Through our work with a host of fantastic organisations over the past 5 years, we’ve seen a tangible shift in the level of interest, knowledge and challenge from charities and social enterprises that we meet with. They know that change is needed in how they approach funding their work in future and want to harness the opportunities available, whilst being aware that it’s only part of the answer. This can’t be quantified with an impact metric, but it’s this that makes me optimistic that social investment will continue to evolve for the better. More charity and social enterprise leaders will be active partners in shaping how this tool is used as a means to help the far bigger, complex, inspiring work of changing people’s lives.
*To drill down and explore in more detail data around front line social investments, look at the data we have recently released.