Social Investment
Paul Halfpenny, the CEO of the Northern Social Investment Group (NSIG) identified six key requirements of a social investor prior to making the decision whether to invest or not in a social enterprise. Those requirements are:
- Market – or more accurately evidence of need
- Financial performance
- Financial management
- Good governance
- People – personnel, skills and capabilities
- Social Impact
Dive into ‘Market’ and need
Additional reading about the aspects 2 - 6. you can be found here.
Social investment is investment that is intended to deliver a positive social impact, as well as a return on the original investment. Social Investment is offered to organisations with a primarily social objective, such as charities, social enterprises and registered societies. Investment capital is commonly provided in the form of repayable loans, with greater flexibility than bank loans, but can be provided as quasi-equity or social impact bonds. Social investment is repayable finance provided for charities and social enterprises. That means that it is not a grant but is money that the investor expects to get back (often with interest) and expects to help create positive social impact.
There are three main reasons why social investment has become more important and prominent.
- It recycles the money we have:Â Because social investment returns to the investor, it can be used again to support more social enterprises.
- It attracts new money:Â Social investment can attract money from new sources: from individuals, mainstream finance, or the private sector. This can help add to the existing money that is available.
- More organisations can use it:Â More social enterprises are trading, and trading means that income is being earned and there is the potential for money to be invested and paid back. Social investment can play a role in supporting the growth or sustainability of social enterprises.
This does not mean that social investment is necessarily right for all. Not all social enterprises need to take on this sort of finance – some may never need it and instead grow organically through growing their customers.
Check out the following links: social investment and social change.