City institutions want bigger social investment opportunities with less risk
Tim West, Social Enterprise Live
Social investments must offer near-market returns, bigger opportunities, better risk guarantees and robust measurement of their social impact to if they are to get serious attention from City institutions.
The findings come in a major new report out today entitled Investor Perspectives on Social Enterprise Financing.
The report also says that the Big Society Bank could be ‘a game-changer’ in growing the UK social investment market. ‘It is likely to have the funding, expertise and weight required to champion the cause of social investment and to bring the City and its institutions more fully into play,’ it says.
The research, jointly commissioned by the City of London Corporation, City Bridge Trust and the Big Lottery Fund, involved 55 interviews with institutional investors including pension fund managers, banks, private equity firms, independent financial advisors and charitable foundations.
It was supported by a high level group of social finance experts from institutions such as Deutsche Bank, Coutts, UKSIF and Venturesome.
Commenting on the report, the Lord Mayor of the City of London, Michael Bear, said: ‘The Coalition Government has made clear the need to help voluntary and community organisations gain access to greater amounts of capital at a time when the industry is facing unprecedented challenges and when the public sector must rein in its spending.
‘The report demonstrates that there is an appetite for such investment amongst a wide range of institutional investors; this interest must be now matched by the development of further financial products to meet the needs of potential investors.’
He said there was no ‘one size fits all’ solution, but that the ‘tremendous innovation’ of the City had already helped ‘create a market which invested £190m in social enterprises in 2010’.
Nat Sloane, England Committee Chair of the Big Lottery Fund, said the research ‘highlights the key role intermediaries have to play in helping investors and investees meet common aims so that charities and social enterprises can better access capital for their work with communities’.
The report, authored by researcher Katie Hill for social investment intermediary ClearlySo outlines some key requirements for social investment to attract institutional investors:
An expectation of market or close to market returns
Some guarantee or mitigation of risk while approaching market level returns – protection of the downside is more important than potentially high upside
Liquidity if possible, which helps reduce perceived risk
Robust measurement of the social returns generated by the investment
Large investment opportunities e.g. through pooled funds
Products and managers with a track record in which City institutions can develop confidence
Social investment research report http://www.socialenterpriselive.com/sites/default/files/stories/files/Social%20Investment%20Report_complete%20file_compressed.pdf
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