A guide to social investment for charities

Best to borrow? A charity guide to social investment

Benedict Rickey, Iona Joy & Sarah Hedley

November 2011

This is an exciting time for social investment. Government, grant-makers and philanthropists are investing in the market, keen to generate social as well as financial returns. The loan portfolios of social investors in the UK are now worth more than £500m. Demand from charities is increasing as government cuts and dwindling voluntary donations hit them hard. Social investment could be a way out of this funding fix.

NPC’s guide to social investment aims to help charities understand the risks and opportunities social investment entails and the steps they need to think through before deciding if it is for them. The guide answers two essential questions: what is social investment and should my charity take on social investment?

Social investment has the potential to deliver real benefits for many charities: it can help them scale up services, develop new projects and smooth out uneven cashflow. But it is not the answer for all. Investment cannot replace the income that charities receive from donations and contracts, and involves significant risk.

Charities need to think carefully before taking on social investment: they need to understand the risks and take steps to mitigate them, and be clear how the investment will create social benefit and improve the lives of their beneficiaries. For charities that have considered the risks fully and are confident of a future income stream, social investment can be an effective way to enable them to do more for the people they help.