Social investment in the UK requires less hype, more transparency from lenders and more focus on the needs of charities and social enterprises if it is going to succeed, according to a commission of thinkers and practitioners in the world of social finance.

After the Gold Rush, the final report of the Alternative Commission on Social Investment, published today, contains 50 recommendations for improving the social investment market.

The commission was funded with a grant from the Esmée Fairbairn Foundation and was led by David Floyd, managing director of social enterprise Social Spider. It was established to assess whether the social investment market in the UK was meeting the access to finance needs of social sector organisations.

Among the key recommendations are changes to the role of social investment wholesaler Big Society Capital, set up by government in 2012 to grow the social finance market.

The report calls on BSC and other social investors to go much further in publishing information about the investments they make, and to be clearer about how social aspects are weighed up in their investment approach.

It also calls on BSC to reconsider its role to prioritise “its impact over its own existence”. At present BSC is set up to exist in perpetuity and to lend at such a margin as to cover its own costs and protect against inflation.

The report also focuses on the fact that government has produced too much hype around social investment, and has focused too much on growing social investment for its own sake, rather than serving the needs of charities, and calls for a move away from this approach.

Other recommendations include “a Compare the Market or Trip Advisor type tool which enables charities and social enterprises to rate their experiences of social investors” and for “large charities and social enterprises to invest in other social sector organisations through peer-to peer models”.

Floyd said in his introduction to the report that the government concept for the social investment market over the last ten years has always been “well-intentioned but misconceived”.

“In theory, the idea of ‘social investment’ suggests the promise of finance which offers something different to what is on offer from banks or other mainstream investors,” he said. “However, investee organisations still need to be profitable enough to take on finance from a Social Investment Finance Intermediary (SIFI) and repay it at a rate that enables SIFIs to at least break even themselves.

“The idea that there are enough organisations underserved by our mainstream financial services to enable the creation of an entire new market to be met by socially motivated investors and for this all to still stack up financially seems too good to be true. That is because it is not true.”

Floyd said that all players in the sector need to realise that “social investment is not quite as magical as it may have initially appeared” but that this “does not mean that it’s wrong to try to use repayable finance to support social good.”

Caroline Mason, chief executive of the Esmée Fairbairn Foundation said the report was “timely and revealing”.

“Social investment is a wonderful tool but to enable social change we need to improve and develop on its execution,” she said. “If social investment is to help charities and social enterprises improve the quality of people’s lives across the UK, then their voices need to be central in policy, market and product development.”

Jonathan Jenkins, chief executive of the Social Investment Business, who was quoted in the report, expressed a more cautious tone.

“I welcome all contributions and suggestions to improve social investment,” he said. “I’ve been saying for some time that all social investors must get better at meeting the needs of frontline organisations and this report echoes that.

“However, we must be careful not to over-react. Just because social investment is not meeting the blue-sky thinking of a few years ago doesn’t mean success isn’t happening.

“This is still a relatively young market and many of the issues identified in the report are being addressed through initiatives such as the Access Foundation and Big Lottery Fund’s Big Potential Fund.”

A representative from Big Society Capital said his organisation would study the findings of the report and respond in due course.