Charity Management

Charities and social enterprises not 'investment ready', says report

28 September 2012

Big Lottery (BIG) has commissioned a report examining what is holding charities, voluntary organisations and social enterprises back from being ‘ready’ for investment.

In his introduction to Investment readiness in the UK (July 2012), BIG’s chief executive, Peter Wanless, observed: “The social investment market has come a long way in recent years but the problem of investment readiness remains a real concern for investors, investees and the intermediaries who try to close the gap between the two.”

The report, compiled by think-tank New Philanthropy Capital and social enterprise consultants Clearly So, surveyed 7,420 VCSE organisations from the Big Lottery Fund’s grantee database and ClearlySo’s membership database. A total of 1,255 organisations completed the survey, which equates to a response rate of 17%. We also carried out a literature review and over 40 interviews with investors, intermediaries and support providers across the four countries of the UK. Five case studies were conducted to provide further practical insights into the journeys taken by organisations to secure investment.  

Worryingly, investors reported significant challenges with investment readiness, particularly noting the lack of suitable financial skills as a critical barrier. Investors and intermediaries also identified wider problems in the market such as a general lack of understanding of the concept and the appropriateness of social investment; the absence of filtering systems which meant that organisations often approached investors too early; poor co-ordination and signposting; and the relative complexity of deals for the amount of finance sought.
When it came to public sector commissioning, evidence of the measurement of social impact was not seen as a major barrier to securing finance, although in
the specific case of public sector commissioning under payment by results (PbR) contracts, this becomes critical. Charities and voluntary organisations need to be able to show that they can create, replicate and price the real cost of their outcomes correctly in order to secure and deliver a public sector contract, and attract the necessary investment to deliver it. The report noted a need for specific sector-based expertise as this is currently in very short supply.
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