Is this social investment's moment?
- 26 Sep
Over the last decade we have proven the concept that social ventures make responsible investees, while generating demonstrable social impact. But the market is still relatively small, only around £165m in 2011.
By Seb Elsworth, Published 21 September 2012
Seb Elsworth is director of partnerships and communications at the Social Investment Business.
This is just a summary - to read full article go to Newstatesman
How can we grow the investors, and investable organisations?
Big Society Capital will provide a key source of new capital into the market. It has quite rightly set some challenging targets around the leverage their £600m of funds must bring to ensure that they don't dominate the market. Co-investment into the funds is likely to come from a variety of sources.
Firstly, charitable foundations are playing a more significant role. Changes in Charity Commission rules should give foundations more confidence that they can invest for a mission related reasons. Similar opportunities will exist for service delivery charities too.
Institutional investors such as pension funds and wealth managers are also increasingly looking at the social investment space too.
Where will be money be invested, and in what ways?
It is the supply of investment-ready deals that is the biggest challenge facing the market at the moment. There are a number of initiatives to address this investment readiness challenge, including the £10m Investment and Contracts Readiness Fund which we are running on behalf of the Cabinet Office.
New public service markets present an opportunity for investment products to help social ventures to access contracts. Many providers delivering payment by results contracts are obvious candidates for investment to help them scale, and cover some of the cash flow challenges of PbR. The opening up of other new markets such as personalised health care and alternative education provision are also attractive for investors.
We can also expect to see community enterprise continue to grow. Others in the sector are using social investment to grow their fundraising capability, such as the innovative charity bond issued by Scope, with the help of our friends at Investing for Good.
There may also be a widening of the definition of what constitutes social investment from simply an investment into a social organisation. Arguably any investment which helps to generate more demonstrable social impact can be classed as a social investment and this may include for profit legal forms in cases where organisations have been unable to attract finance to grow their social impact. That may also open the opportunities for more equity investments rather than simple debt.
To enable all this there is still a key role for government. Over the last decade government has been a major source of capital into the market through initiatives such as Futurebuilders and the Social Enterprise Investment Fund run by DH. With the growth of Big Society Capital, and the concept of social investment proven, they are understandably moving away from this, but government's role now is to create a regulatory, tax and legislative environment which best supports the development of the sector.
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