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Large charities should put more cash towards social investment, event hears

27 Jan 2022 News

A leading social entrepreneur has called on charities and foundations to put more of their money towards social investment.

Susan Aktemel, director of the Scottish social enterprise Homes for Good and a member of the Commission on Social Investment, said that charitable trusts in particular should be more involved in “shifting the dial” on levels of social investment.

She was speaking online yesterday at the launch of the Commission’s report Reclaiming the Future.

Victor Adebowale, who chaired the Commission, told the same event that the social investment market needed “reform not revolution” so that it could meet the needs of the country in the years ahead.

Charities and social investment

Discussing ways to make social investment more attractive to trustees of large, locally-focused assets such as council pension funds, Aktemel said: “There is a significant collective balance sheet in charities, and at larger charities a cash balance sheet.

“If they were all looking at how they could maximise the use of their money for social good and for social change, then that would actually create competition within the social investment sector.”

She added that trusts and foundations could take a key role in “shifting the dial” on new sources of social investment. If those bodies increased their investments from “1% of their assets being in social investment – what an opportunity there is there”, Aktemel said.

The Esmée Fairbairn Foundation announced last November that it was allocating £10m from its investment portfolio to impact investing.

Talking to government about £50m proposal

Answering a question about the Commission’s recommendation of a £50m financial vehicle led by Black investors and social enterprise experts, to help address the sector’s “serious problem” with diversity, Victor Adebowale suggested that this potential investment should be “government-led” rather than privately financed.

He said: “As a general response, I am hearing that the government is actually welcoming what we have done in this report generally.” Adebowale said he had already talked to ministers about the report and would be speaking more with officials about the idea of a Black-led fund.

Asked about its commitment to any new Black-led social investment fund, a spokesperson for the department for Business, Energy and Industrial Strategy (BEIS) directed Civil Society News to a tweet by charities minister Nigel Hiddleston. Huddleston, who is not a BEIS minister, said on Wednesday: “Thank you Lord Adebowale & the Independent Commission for Social Investment for this report outlining how we can better support social enterprises through social investment. Looking forward to working with you to help make the next decade a success for  social enterprises.”

Earlier in the event, Adebowale called on social investors to embrace “reform not revolution” in a bid to play a part in political priorities including levelling up different regions of the UK and reaching net zero carbon emissions.

‘Lack of empathy’ from investors 

Another commissioner, James Broderick, told the event that the sector needed to fix an “underlying gap” between what social enterprises needed and the sort of financial support investors were willing to provide.

He said: “Investors often simply do not understand well enough the work of social enterprises, and that lack of empathy and understanding and affiliation is quite damaging. 

“It can cause them – the investors – to over-estimate the riskiness of the social enterprise, and it makes them less interested in exploring creative and innovative solutions for their capital needs.”

The report called for investors to provide much more flexible capital to social enterprises, with loans made over longer periods and with less of a focus on financial returns. Broderick, the director of Impact Investing Institute, said he hoped investors would be “inspired” by the report to take a new approach “to the people they serve”.

Editor's note 1 February 10.00am: Article updated to include government response to proposed fund

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