Share

Lord Hodgson outlines barriers to social investment growth

Lord Hodgson of Astley Abbotts
News

Lord Hodgson outlines barriers to social investment growth1

Finance | Tania Mason | 13 Jun 2012

Charities must be allowed the freedom to approach potential social investors in a more informal way than they can currently if the social investment market is to grow, Lord Hodgson of Astley Abbotts said this week.

Lord Hodgson – who is leading the official review of the Charities Act 2006 - was speaking at the second reading of the Financial Services Bill in the House of Lords on Monday.  He pointed out that although the government is keen to encourage social investment, it is barely mentioned at all in the Bill.

He said that the biggest challenge to the growth of the market concerns the interaction between charities and their individual supporters.

“The missing piece in the jigsaw at present is the ability to approach individuals about social impact investments without the need for a full Companies Act prospectus, the cost of which renders almost any scheme uneconomic,” he said.

“We are therefore in the counterproductive and counterintuitive position that an individual can give his or her money to a project and be certain that he or she will not get it back, but he or she cannot lend or invest it if there is any prospect of any return at all. That cannot be a sensible way of proceeding to try to encourage our fellow citizens to put money behind social impact projects that this country badly needs.”

Lord Hodgson said he hoped that when the Bill reaches Committee stage, ideas will be discussed to “help the social impact butterfly out of its chrysalis”.

Self-certified social investor

One such idea he proposed is to establish a class of individual supporters or investors, “perhaps by creating a self-certified social investor along the existing lines of the self-certified sophisticated investor”.

In 2005, the rules relating to approaching people regarding financial promotions were relaxed so that so-called ‘sophisticated investors’ - high net worth individuals - could be more easily approached with a view to making investments in unlisted securities. The purpose was to remove impediments to business angels and others seeking finance for small businesses and to allow entrepreneurs to find venture capital more easily.

Lord Hodgson acknowledged that various government departments will need to be involved if the social investment market is to move forward significantly, and added: “In my view, it will probably take a generation for the social impact investment movement to reach its full potential, but we need to plan now, and financial regulation, more than any other sector, holds the key.”

Chris Zealley
truteeships various
13 Jun 2012

The current enthusiasm for social investment overlooks one major problem it will make for charitable trustees and lenders. Someone making a grant, as Lord Hodgson says, knows that they wont get their money back. So in that case there is no problem for trustees.

But investors providing loans, however easy the terms on which they have been made, are entitled to clear rights regarding the return of their money, otherwise they might just as well make a grant. So the so far unanswered question for trustees is where the repayment of loans stands in the hierarchy of their obligations in carrying out their trust.

Comments

[Cancel] | Reply to:

Close »

Community Standards

The civilsociety.co.uk community and comments board is intended as a platform for informed and civilised debate.

We hope to encourage a broad range of views, however, there are standards that we expect commentators to uphold. We reserve the right to delete or amend any comments that do not adhere to these standards.

We welcome:

  • Robust but respectful debate
  • Strongly held opinions
  • Intelligent relevant discussion
  • The sharing of relevant experiences
  • New participants

We will not publish:

  • Rude, threatening, offensive, obscene or abusive language, or links to such material
  • Links to commercial organisations or spam postings. The comments board is not an advertising platform
  • The posting of contact details for yourself or others
  • Comments intended for malicious purpose or mindless abuse
  • Comments purporting to be from another person or organisation under false pretences
  • Gratuitous criticism, commentary or self-promotion
  • Any material which breaches copyright or privacy laws, or could be considered libellous
  • The use of the comments board for the pursuit or extension of personal disputes

Be aware:

  • Views expressed on the comments board are left at users’ discretion and are in no way views held or supported by Civil Society Media
  • Comments left by others may not be accurate, do not rely on them as fact
  • You may be misunderstood - sarcasm and humour can easily be taken out of context, try to be clear

Please:

  • Enjoy the opportunity to express your opinion and respect the right of others to express theirs
  • Confine your remarks to issues rather than personalities

Together we can keep our community a polite, respectful and intelligent platform for discussion.

Free eNews

Over 145 charities receive donations from #icebucketchallenge through JustGiving

1 Sep 2014

Over 145 individual charities have benefited from donations made as a result of the ice bucket challenge,...

Supermarkets donate profits from #icebucketchallenge to MND Association

29 Aug 2014

Tesco has announced that it will donate the profits made from an increase in sales of ice to the Motor...

Commission contacts Bradley Wiggins' charity over concerns about how it has spent donations

29 Aug 2014

The Charity Commission has contacted the trustees of the Bradley Wiggins Foundation after the charity...

Sky News anchor accuses Barnardo's chief of fence-sitting over Rotherham scandal

1 Sep 2014

Barnardo’s chief executive Javed Khan refused to call for the resignation of South Yorkshire Police...

Former Awema chief executive cleared of two counts of fraud

1 Sep 2014

The former chief executive of the Welsh race relations charity, Awema, was cleared of two counts of fraud...

Charity Commission launches inquiry into Aid and Peace Trust

1 Sep 2014

The Charity Commission is investigating the Aid and Peace Trust over concerns about the management of...

Over 145 charities receive donations from #icebucketchallenge through JustGiving

1 Sep 2014

Over 145 individual charities have benefited from donations made as a result of the ice bucket challenge,...

EU data protection proposals would kill fundraisers’ mailing lists, says report

28 Aug 2014

Proposed EU data protection rules could destroy mailing lists relied on by charity fundraisers, and would...

Macmillan: We did not hijack #icebucketchallenge

21 Aug 2014

Macmillan has hit back against accusations on social media that it has hijacked #icebucketchallenge, saying...

Join the discussion

 Twitter button

@CSFinance