A social investment fund should be set up to cover the costs of mergers in the charity sector, trustees heard earlier this week.
The event on social investment for trustees was held at the London Stock Exchange and was hosted by Trustees Unlimited, together with social lenders Allia and Big Society Capital, as part of trustee’s week.
Delegate Mike Rogerson, a trustee of helpline charity Samaritans, suggested that social investment was needed to help cover the costs of merger. He said a fund which charities could borrow from to join together would be a “fantastic boon for the sector”.
Nick Jenkins (pictured), founder of Moonpig.com, former BBC Dragon and investment committee member of Impact Ventures UK, said he thinks it is a “great idea”.
He said that one problem of mergers was that one of the principal individuals involved in setting it up was likely to lose their job.
“I always congratulate people who fall on their sword to allow two charities to merge”.
Harvey McGrath, chair of Big Society Capital, also sitting on the pane, said that mergers are “extraordinarily difficult to do in the commercial world, but it is even more difficult to do in the charitable world where you are always on the bottom line”.
He said that there are two obstacles when it comes to mergers, that of dealing with the “egos of founders of perspective charities”, and the costs of mergers in terms of redundancy pay.
Mary Marsh, who was chief executive at NSPCC when it merged with Childline, was a delegate at the event.
She said that the real elephant in the room when it comes to mergers is pension costs.
The panel discussion was chaired by Tim Jones, chief executive of Allia, a charity that supports social ventures. Jones said that he had recently been involved in similar discussions on funding mergers, but "whether any solutions are ready to emerge we shall wait and see".
It is not helpful to disparage grant dependency
Anna Southall, chair of the Barrow Cadbury Trust Investment Management Committee, said that although social investments offers a welcome alternative source of finance, she does “sometimes worry about the current rhetoric”.
She said: “I don’t think it is helpful to disparage grant dependency; I don’t think it is helpful to describe charities as risk-adverse when they think new forms of finance are not for them.”
McGrath spoke of the merits of social investment. He said: “My view as a philanthropist and indeed a trustee of a number of organisations is that we will continue to see this market develop and I have a strong conviction that the intelligent use of private capital to help grow and scale interventions that work will become a key part of this landscape going forward.
“It is not a panacea or silver bullet which will solve all the problems of the charitable sector… It is repayable finance and the fact is that it may not applicable for many charities whose models rely solely on grants or donations.”
