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Governance and Social Investment

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Exploring the experiences of charity and social enterprise Boards with social investment. 

There’s been a great deal of debate around the role of social investment in the future funding mix for the voluntary sector, particularly with the changing role of charities in recent years, the challenges that they face with increased demand for services combined with reduced funding. However charity trustees have largely not been involved in this discussion to date, and it’s often cited that a key barrier to charities using social investment is the caution of charity boards in this area. 

We know that social investment can bring opportunities to enable charities and social enterprises to grow, develop new services and form new partnerships to increase their impact. But we’re also aware that social investment can present challenges for Boards. They have to balance their roles in driving their organisations to increase their impact on the one hand as well as managing risks around taking on repayable finance, and also get to grips with new funding models in the process.

Over the last year, we’ve spent more time understanding the Trustee perspective of charities who have used investment – in order to share their experiences more broadly, so that other charity and social enterprise Boards, where relevant, can consider whether this is the right thing for their organisation.

There are some common themes from these discussions – with both large and small organisations:

  • Shared ambition between the Board and management team to grow their impact
  • Getting the right mix of skills and experience on the Board in the first place is key
  • Board role in embracing risk & opportunity to deliver mission in additional ways against asking the right questions and protecting the organisations’ assets
  • Key ingredient for success is the underlying trust between Executive and Board

These themes are set out in more detail in this paper, and we’re pleased to have contributions from the Charity Commission, Association of Chairs, and Trustees Unlimited, a social investor and a charity chair as well. We’ve also included several case studies from our discussions, highlighting the diversity of organisations using social investment and giving interesting insights into the governance aspects.

What do Trustees think needs to improve if social investment is going to be more readily used as a tool to deliver impact?

  • Boards need to be strengthened with private sector and other agencies potentially playing a role in finding Trustees with necessary skills, whilst still maintaining focus on mission and impact
  • Providing information for Trustees, to help them make sense of the funding landscape and enabling more informed decisions
  • Encouraging more discussion around the opportunities and risks of social investment at Board level earlier in their thinking around strategy, rather than when looking to fund a specific project.
  • Demystifying common questions around risks and responsibilities which can raise red flags
  • Sharing stories & learnings and reaching more Trustees & Non-Executive Directors

We don’t expect to address all these issues, particularly around strengthening governance in general, but we will work with partners over the next year to help tackle some of the themes raised. An organisation that has a strong Board, well informed about the range of funding options available to them will clearly be better placed to deliver impact longer term, and social investment may well be part of the solution for many more organisations as a result. We look forward to working with charities, social enterprises, their Trustees & Non-Executive Directors and organisations working to support stronger governance in the sector to enable more of the opportunities around social investment for the sector to be realised.

Last updated | 
7 July 2016