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What do charity leaders think about social investment?

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More charities are looking at alternative ways to fund their work and as a result social investment has been the subject of increased interest and scrutiny.

At Big Society Capital, our aim is to increase access to social investment for charities and social enterprises, and our work needs to be shaped by an understanding of the charity sector’s appetite and needs in this area. At ACEVO, our mission is to be the leading collective voice of charity and social enterprise leaders and to encourage innovation, enterprise and professionalism across the social sector. Together, we created a survey to better understand how charities and social enterprises are responding to the challenge and opportunity of social investment. The full responses are in the report What Do Charity Leaders Think About Social Investment. What does it tell us? While it is difficult to draw general conclusions, there are some emerging trends:


Charities are in a confident mood with reasonable appetite to consider social investment.

Despite the challenges of the economy and funding environment, over two thirds of the charity leaders felt that their organisation was well placed for expansion. Although 76% of the charities had never taken out a loan, 44% felt that repayable finance could be beneficial for their charity. This indicates that there should be more demand for loans from charities, which is also supported by recent research, such as CAF Venturesome’s In Demand, and growing interest over the past year from our discussions with charities.

CEOs think that their trustees would consider social investment.

Of the charity leaders who thought that repayable finance could be beneficial, 83% felt that their trustees would definitely or possibly consider a loan. This seems much more positive than might be expected, given that trustees are often considered to take a more cautious approach than their management teams.

Social investment is seen more positively by larger charities and/or those seeking to grow.

Not all charities can or should use repayable finance. From the responses, social investment is more likely to be helpful for organisations that are larger (income of over £1 million) or that have plans to expand through contracts for public services, or enterprise activity. It’s also striking that nearly 80% of charities who had already taken out a loan felt that further investment could benefit their organisation – perhaps evidence that successfully accessing repayable finance has increased their confidence and ambition to scale up their work further.  

Future demand is not just for buying assets.

75% of loans taken out by charities were used to buy properties and other assets, and we know that around 90% of social investment historically has been in secured loans. The charities’ responses indicate that there is potentially increased demand for loans to finance other areas such as cash flows for contracts or investing in staff. The increased level of unsecured loan funds for charities now available, for example those managed by Social and Sustainable Capital and FSE, could be relevant in meeting this need.

Social investment isn’t only about taking out loans.

Whilst the survey was framed in terms of charities’ appetite for borrowing, there are other ways to access social investment that don’t involve charities taking on debt. For example, renting property for service delivery from a social property fund or accessing funding through Social Impact Bonds, where investors take the financial risk associated with outcomes-based contracts.

Understanding social investment and navigating the landscape. 

It’s commonly cited that social investment is an area that charities find difficult to engage with, so it’s encouraging that 64% of CEOs surveyed felt that they understood social investment. There is clearly more progress to be made to increase awareness and understanding within the sector. Based on the survey responses, charity CEOs would most commonly look for information on social investment through digital channels rather than through attending events, perhaps unsurprising given the pressures on their time.

Charity investors.

The ethical and responsible marketplace remains beyond the purview of many charities. Many charities identify a lack of appropriate products in the marketplace as a significant barrier. These issues are explored in detail in ACEVO’s “Good with Money” report. There needs to be more charities putting the onus on their advisers and investment managers to develop an approach that reflects their mission and values, if this is going to significantly shift in future.

Last updated | 
12 February 2015


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