Social investment offers the opportunity for socially-minded investors to increase the impact of their money. It's still early days, but already the concept has attracted much interest from funders and has the potential to help charities access long-term, affordable finance. In Best to invest? A new social investment guide for funders published today, NPC finds that the crucial 'next wave' of potential funders are being put off by the perceived complexity of social investment. People interested in social investment are being deterred, as it can be challenging to value accurately social investments in terms of the likely social and financial risk and return; the legal structures involved are complex and often bespoke for each investment; and it can be difficult to obtain investment advice, which is regulated by the Financial Conduct Authority (FCA). The final barrier identified is that investment decisions tend to be outsourced to professionals who are not comfortable or familiar with the blending of the financial goals of investment with the social goals of grant-making. However, interest in social investment among funders is growing. In a time of spending cuts and austerity, many funders are seeing increasing demand for their funding to pay for services previously supported by government contracts or public donations. At the same time, many trusts and foundations have seen the return on their investments dwindle, making it harder to sustain their grant-making. In this context, social investment is an attractive prospect for funders who want to do more to support charities and social enterprises, in a way that has the potential to make both more sustainable in the long term.
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