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Social investment

Growing financial and social investment returns
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Social investment is finance offered to voluntary and community organisations with the expectation of financial repayment. It involves weighing the social and financial returns of investments in different ways. This can mean accepting lower financial returns if the social impact is greater.

Benefits

Social investment has been shown to bring social and economic benefits. It enables social ventures to access finance to grow and achieve greater social impact.

Growth

In 2011/2012 the social investment market exceeded £200 million for the first time. It’s seen as an area for growth going forward.

Our research shows that the majority of Social Investment Finance Intermediaries (SIFIs) expect to increase their investments in social ventures. There’s growing demand for social investment too. We’ve seen that SIFIs have only been able to meet about half the demand of social ventures.

However, there are limits to growth in the social investment market.

Barriers

Limits to growth can stem from organisations not being 'investment-ready'. In many cases, it might not always be the best approach due to:

  • a lack of suitable financial skills
  • a general lack of understanding in the wider market of the concept and appropriateness of social investment
  • approaching investors too early
  • poor coordination and lack of signposting to support sources
  • relatively complex deals that are available for relatively small sums of finance sought.

Factors for success

Recognising what investors want and need can help organisations attract investment. While social factors inevitably play a part, investors still look for levels of return that match or come close to matching returns that they can find elsewhere. Designing investments for philanthropic investors therefore might not generate the best returns. Other factors to consider include:

  • mitigating investment risk
  • highlighting and providing robust evidence of social return
  • offering investors the chance to pool funds.

Support

Our research has shown that support is needed to grow the social investment market. More information, training and signposting is needed to help organisations take advantage of social investment.

Particularly useful support has been identified as:

  • bespoke business and finance
  • step-by-step guides to getting into social finance

Other support that has been seen to be less useful includes:

  • investment-readiness support courses
  • online mentoring.

More about the research

Growing the Social Investment Market

We worked with Big Society Capital, City of London Corporation and Government to commission a report about the social investment landscape. ICF GHK in association with BMG Research carried out the research in 2013.

Investment-readiness

In 2012 we commissionedClearly So and New Philanthropy Capital to help us better understand when social investment works best. They investigated:

  • what ‘investment-readiness’ means and to whom
  • the barriers to becoming ‘investment-ready’
  • the support needed to become investment-ready and how BIG and other funders can help

Promoting social investment

We worked with the City of London Corporation and the City Bridge Trust to commission a study. It looked at how to attract social investment in 2011.

Mapping Social Enterprise in Scotland

We commissioned EKOS Consulting to map social enterprises and their activity across Scotland, enabling us to understand their prevalence, scale, characteristics, reach, distribution and financial health. This will give us a baseline from which we can measure the difference made by our suite of social investment-themed initiatives in Scotland.

Learning about the impact of our funding on social enterprises

We commissioned Social Enterprise UK to evaluate the impact that our funding has had on social enterprises so we can improve our support for social enterprises in the future.

Publications

Growing the Social Investment Market

Growing the Social Investment Market: The landscape and economic impact
Investor perspectives on social enterprise financing

Investment-readiness

Social investment readiness report
Social investment readiness report summary
Social investment case studies
Social investment readiness data (part of our open data commitment)

Mapping Social Enterprise in Scotland

Directory of Social Investment in Scotland

Learning about the impact of Big Lottery's funding on social enterprises

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