Charities are shifting their funding models from donations to borrowing and social investment, according to new research from City University London’s Cass Business School. The CASS CCE research report, titled ‘Social investment as a new charity finance tool: using both head and heart,’ was based on two years of research, including 120 in-person interviews.
The report defines social investment as investments made with the intention of ‘generating a social or environmental impact, as well as a financial return on the investment. On a broader scale, social investment can be thought of as utilizing investments in the market to impact society.
Despite the anticipation of this shift in funding and its growing popularity, some charities don’t feel comfortable with using ‘borrowing or investment tools,’ according to the report. Part of this concern could be attributed to a lack of understanding about the concept of social investment.
The report discovered that ‘many charities would not borrow for working capital, fundraising or even for property.’ Mark Salway, Director of social finance and social investment at CASS CCE, commented on these concerns and the power of small-value loan, stating, ‘A mix of grants, donations and social investment funding is now seen as the future for many.’
Overall, the research found that 60 percent of charities surveyed felt positively about the concept of social investment, with 17 percent stating that social investment could potentially ‘transform their business models.’ The report estimated that a transition to social investment will account for approximately £4 billion to £6 billion in capital for the sector in the UK.
For more on social investment read this interview with Big Society Capital CEO, Cliff Prior.
Sarah Sabatke is a student at the University of Missouri, and is an editorial intern with Alliance.