Socially responsible organistions are not solely concerned with profit-making; they should demonstrate an interest in making a difference toward wider societal issues; which in turn reaps the benefit of positive shareholder and consumer regard. We assume that by virtue of being a charity, trustees want to fulfill an ethical or socially responsible brief. When it comes to funding, they should be able to assess themselves against a clearly defined checklist provided by their potential financial provider, whom themselves should also be advocates of responsible finance in order to ‘practice what you preach’.

While profit is clearly a vital area for a bank, supporting the amplification of social impact through funding and capturing the difference this makes for the people and communities they serve is also crucial. This is a ‘double-bottom line’ strategy. Mission led financiers are concerned with offering repayable finance that allows social enterprises to grow, consolidate debts, become more sustainable and increase their impact on society. Mainstream finance simply does not offer this level of patience and encouragement. Social finaciers offer term loans to charities that work alongside cashflow requirements, actually understanding charities cashflows and the need for long term funding – often offering repayments structured over 20 years. As a socially responsible lender, the bank understands demands and the inward tug war between funding the next project and spending money internally and how to balance these needs when designing funding.

Measuring impact

Measuring impact is increasingly important for both the charity and the financial provider. The weight of impact is increasing on the agenda of investors, and charities with tangible reports are more likely to secure funding. Not only this, but it sends a positive message to shareholders through performance monitoring; the ability to judge the success of an organisation is vital in proving that social impact is being made, but also gives direction of how to improve. A signal to investors that an organisaton is delivering on its mission and values.

This moves organisations progressively from motivation and intent towards impact reporting. This can be achieved in a number of ways. The Outcomes Matrix, developed by Big Society Capital, in partnership with social investment intermediaries and impact experts, is a helpful tool and seeks to provide a common language for those seeking guidance in measuring social impact. It identifies areas for improvement for the enterprise, and attracts further investment with evidence-based impact.

Charities need to understand and set out what they are seeking to achieve in terms of activities, outputs and outcomes and align these goals to that of the desired financial provider. By identifying key metrics and measurements which reflect the desired outcomes enables organisations to demonstrate this evidence. With this knowledge, the financial provider is then best educated on whether or not to offer the required funding. In many cases, the desired outcomes will be closely linked to the founding principles of the charity embedded in its constitution and more importantly its culture.

It is important to celebrate success and share best practice and key learnings with organisations who share values and a common purpose. An increasing number of organisations choose to publicise their progress alongside their annual financial reporting. These reports provide a rich source of learning, become part of the organisation’s culture, inform day-to-day business decisions and provide insight into how the lives of people and communities have been improved.

It is agreed that finance is a tool for good. Social finance providers have the edge over the mainstream in the terms of their offerings being that of patience and encouraging growth, which creates more social impact. Social impact is necessary for social finance – and measuring it is a vital discipline. Creating new ways to make our economy work so we can fix the unnecessary problems facing our society, while also creating economic returns, is both a complex and exciting venture. If we can create investments with social impact, then we can work together to deliver a better world.

Bella Jones is senior communications manager at Unity Trust Bank

Charity Finance wishes to thank Unity Trust Bank for its support with this article