Government has been reminded not to ignore the needs of charities when it comes to pushing social investment, in a new report published by the Charities Aid Foundation.
The study warns that although social investment is an approach with huge potential, policy makers risk focusing too much on a grand future vision and new ideas for models which promise to give investors both social returns and commercial-rate financial returns.
Returns Policy? What the next decade holds for social investment argues that charities are in fact more in need of practical forms of investment, such as affordable repayable finance, and investors should sometimes be prepared to sacrifice financial benefits in order to create a wider social impact.
The report follows publication of a G8 Social Impact Investment Taskforce’s study yesterday, setting out recommendations for ways to unlock billions in social investment worldwide.
CAF programme leader of giving thought Rhodri Davies welcomed the G8 looking at the future of social investment, in an environment where grant funding is falling alongside growing demand for public service delivery from the voluntary sector.
“But we can’t get too carried away pursuing a grand vision of a future when the reality at the moment is that charities primary need is simply access to affordable repayable finance,” Davies said. “This may have low returns for investors but will ultimately create the widest impact.”
The CAF report makes eight recommendations to guide policymaking. Grant funding should be used to help charities build skills and infrastructure to become ‘investment ready’, it argues, and payment-by-results contracts need to be designed carefully to work for charities and social enterprises.
Charities and social enterprises should be supported to take advantage of the new rights to challenge local service delivery and buy community assets, the CAF recommended.
The report warns against ignoring the philanthropic end of social investing, or the need for capital funding with little or no expectation of financial return beyond the capital itself. Social investors should not be expected to subsidise private gain for commercial investors or public sector commissioners, it said.
Other recommendations include charities and charitable trusts being encouraged to consider social investment, local authorities becoming social investors, and companies embracing social investment.
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