Seven things you need to know about social investment

David Cameron has today called for a major growth in social investment. Here are seven things you need to know about social investment…

  1. Big Society Capital defines social investment as  “the provision and use of capital to generate social as well as financial returns”.
  2. David Cameron thinks it’s a great idea and is throwing his weight behind it ahead of the G8 meeting of world leaders at the end of June. He recently told the Telegraph: “Britain and other developed nations face a shared challenge – sorting out our debt problems and achieving economic growth. We need to do this at the same time as improving public services and tackling our deepest social problems. That’s why this Government has placed such an emphasis on social innovation from charities, social enterprises and other businesses”
  3. Investors are increasingly looking to make ‘social investments’. According to JP Morgan the global market for social impact investment is estimated to be worth $9 billion and expected to grow to between $200 and $650 billion in the next decade.
  4. How is Scope involved? We were the first traditional charity to venture into the social investment bond space, blowing open the space for other charities. We launched our Bond in 2011, which offered investors a return of 2% and the opportunity to support our work making this a better place for disabled people. We raised £2m; and used it to fund new charity shops and seek new regular donors, which in turns provides us with a sustainable income for our network of parents befriending groups and info and advice service. Check out this blog from Tom Hall. The first tranche of the Bond is closed, but Richard Hawkes hopes Scope’s work will inspire others. “Charities can’t just rely on traditional donations. Investors are looking for ways to invest their money that has a social as well as financial return. We need to bring them together.”
  5. Why does a charity do it, it sounds risky?  Charities need a mix of income streams. The social investment bond creates an alternative way for people to support our work alongside the philanthropic loans and traditional donations. Donations are important; they support vital work on the ground. But charities also need to invest in activities that generate long term, sustainable income – such as fundraising or charity shops. Not every donor can fund these activities. But – as they generate income – it is perfect for a social investor, who wants to support a charity, but also wants to see a return on investment.
  6. How is a charity able to pay a loan back with interest? We are investing the money we raise in activities that generate long-term, predictable and sustainable income, such as our fundraising programme and our retail network. That means we can be confident that we can return the investment and also fund our work to make this country a better place for disabled people. Find out more about the impact Scope’s Bond had in this Investing for Good case study.
  7. So, what can be done to grow the market? Scope is also backing the launch of the Social Stock Exchange (SSE), a portal for social enterprises and social purpose businesses seeking to raise capital and for social impact investors wishing to find businesses that reflect their values.  The Government also has a chance to send a strong message with its proposed consultation on tax relief for social