Report predicts £6 billion funding shift towards social investment

(via UKFundraising)

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Charities are anticipating a major shift in funding models towards social investment as less income comes from grants and donations, a new report by Cass CCE has said.

The research report, Social investment as a new charity finance tool: using both head and heart, by Cass CEE, involved face-to-face interviews with 120 charities, a social investment symposium and an online questionnaire. The results point to a shift away from grants and donations towards social investment and more borrowing in the next five years.

The report found that 60% of the charities were positive about social investment, with 17% saying it could transform their business models. The research estimates that the shift towards social investment could account for approximately 11% of funding: equivalent to around £4bn–6bn capital for the sector.

However, the report highlights a number of barriers to charities using social investment as a funding tool. These include a lack of understanding about it, with some charities feeling conflicted or uneasy about using borrowing or investment tools and others having ethical concerns. 7% were openly negative about social investment and the report found that many charities would not borrow for working capital, fundraising, or for property.

Charities are also concerned about how they would create a revenue-generating model to pay back any such investment, and while trustees were positive on almost all aspects of charity finance strategy, the report found them 20% more negative about social investment compared with the CEO or finance director. The report states that addressing trustees’ risk aversion towards social investment will therefore be critical for social investment to be successful.

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