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Social Investment and Blended Finance

Thu, 01/12/2016

Grants, Social Investment and Blended Finance

 

Some Basic Definitions of terms:

 

What is a grant?

 

A payment to a third sector organisation that may have some conditions attached but does not have to be repaid.

 

 

What is social investment?

 

Social investment means finance provided for VCSE organisations, which the investors expect to both get back and to create social impact. (Big Potential)

 

What is social impact?

 

The effect of an organisation’s activities on ‘society’ – usually a specific social problem, group of people or local area; also referred to as social value. (Big Potential)

 

 

What is blended finance?

 

The mixing together of a number of sources of capital, each investor with their own social and financial objectives and requirements to create an investment product which better meets the needs of charities and social enterprises (Access Foundation)

 

 

Social Enterprise

 

A business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners (Big Potential)

 

Third Sector/Voluntary and Community Sector

 

It is sometimes referred to as civil society, the third sector, the voluntary and community, non-profit, not-for-profit, charity, social and even beyond profit sector. It is made up of many different categories of activity affecting many aspects of society. The various terms are used by different people to include different combinations of activity which can be confusing.

The common understanding behind the categorisation of the sector is that it is separate from government and exists to make a difference to society rather than to make financial profits (NCVO)

 

As a third sector organisation looking at social investment or a blended finance scheme or product, how do you know what finance is best for you? Big Potential provides a useful guide. Pdf required here.

 

Definitions of other terms used in social finance can be found in the Big Potential Lexicon

 

Measuring Social Impact

 

When looking at social investment and blended finance products organisations will need to consider how they measure and report on their social impact. There are different methods and tools that help organisations to consider this.

 

Big Society Capital Outcomes Matrix - developed by Big Society Capital in partnership with social investment financial intermediaries, front line organisations and impact experts including Investing for Good, New Philanthropy Capital, Social Value International and Triangle Consulting. The tool helps organisations to plan and measure their social impact. It includes outcomes and measures for nine outcome areas and 15 beneficiary groups.

 

Inspiring Impact - a UK-wide collaborative programme working to with the charity sector to help organisations know what to measure and how to measure 

 

Global Value Exchange - a free and easy-to-use tool made to help you understand the value you create. 

 

New Philanthropy Capital - NPC are passionate about impact measurement and have produced lots of resources on the subject. 

 

Social Value UK - the national network for anyone interested in social value and social impact

 

Outcomes Star - an evidence based tool for supporting and measuring change 

 

It’s important to consider which is the best one for your organisation.

 

Resources

 

There are some useful resources that help trustees and staff to better understand what social investment and blended finance can achieve. The Access Foundation, Charity Bank, Good Finance and Unltd cover how to get started, different types of finance, legal issues, marketing as well as training and capacity building tools, advice and guidance.

 

Examples and Case Studies

 

There are also some useful case studies to be found that illustrate how different types of voluntary and community sector and social enterprises have accessed and used social investment and blended finance that can be found on Big Potential,  Big Society Capital, Charity Bank and Good Finance.

 

 

Funding and Investment Sources

 

The market for social investment and blended finance has been growing and there are now a number of different sources of finance and investment that can be found in the UK. Some organisations act as intermediary bodies to distribute the investment. Certain funds have been developed for different types of social enterprises and voluntary and community organisations and for different stages of development. Some examples are Key Fund, Power to Change, Charity Bank, Big Society Capital, Big Issue Invest,

The Reach Fund, UnLtd to name a few. More can be found on the  Big Potential

 website.

 

 

For further reading on the development of social investment and blended finance go to Big Society Capital for a range of publications and the Big Lottery as well as government policy on social investment. A recent report produced by the Institute of Voluntary Action Research takes a close look at the ‘social investment journey’ of 25 small charities, providing in-depth insights into their motivation, experience of the process, challenges encountered and the support they received. Identifying what is important to small organisations and what actions can improve the journey.

 

 

 

November 2016