New fund allows social investors to support charities and social enterprises
Wednesday, February 26th, 2014 By
A new partnership aims to attract finance for charities and social enterprises from the private sector, allowing investors to do good with their money as well as receive a financial return.
The Community Investment Fund, launched by Social and Sustainable Capital, will make loans and equity investments of £250,000 to £1m. It will invest in community-based organisations that are improving the lives of local people, particularly the vulnerable and disadvantaged, by providing local solutions to local needs, creating jobs and developing their local economy.
The fund expects to invest around £5m each year, focusing on organisations providing health and social care, education, training and employment support, and children’s services across England. The Social Investment Business and Big Society Capital, which jointly finance Social and Sustainable Capital, have each committed £10m to the fund, with initial contributions of £3m each.
The new partnership is responding to demand from charities and social enterprises for accessible and flexible finance. By 2016, demand for finance from the third sector is expected to increase by up to a billion pounds.
Sir Stephen Bubb, chair of the Social Investment Business, said, “We know there is huge demand in charities and social enterprises for simple lending, secured and unsecured, but precious little supply of either. This needs to end if we are to grow our third sector.”
From an investor’s perspective the fund has a target return of 5-8%. It will also operate transparently, providing investors with information on how the overall fund is performing and the impact the investments are having several times a year.
Ben Rick, founder of Social and Sustainable Capital, described private investment as “completely key” for the third sector. He explained that the launch of the new fund would allow investors to achieve a “double bottom line” and would target investors that are interested in social investment or sitting on the fence but may be cautious of placing their money into a fund.
“All of the investors we have spoken to see the appeal of investing for social and financial return. The fund is about making them comfortable enough to do it for the first time,” Rick said.
Meanwhile, Nat Sloane, chairman of Social and Sustainable Capital and co-founder of the UK’s first venture philanthropy trust fund, the Impetus Trust, added that the organisation aims to play a key role in unlocking commercial investment by offering vehicles which meet investor requirements and develop investor confidence.
He said, “The potential scale of private capital available to fund social investment is enormous and is important for the sector’s long-term growth.”
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