A rethink about the risk appetite for social investment among charities and social enterprises has led to the relaunch of a £30m fund.
Benjamin Rick, Co-founder and Managing Director of Social and Sustainable Capital (SASC), pictured, says "We thought that it would be investors who would be risk averse but in fact it is charities. The economic environment over the last four years has also been much harder than we anticipated and having surveyed our market we are relaunching the fund with more flexible terms . We also realise that the relationship between investors and investees has to be more collaborative and less transactional."
The UK fund manager and social enterprise is re-launching its £30m fund as ‘The Third Sector Investment Fund’, offering UK charities and social enterprises secured and unsecured loans, finance for payment by result (PBR) contracts, and quasi-equity investments from £150,000 to £3m.
The key changes to the fund are longer investment periods of up to 15 years, more flexible repayment terms than many social investment funds and higher levels of support from the SASC team throughout the entire investment process. As before, potential investees must be able to demonstrate their social impact – that they are working to improve the lives of the most disadvantaged people across the UK.
The fund was originally launched in 2014 as the ‘Third Sector Loan Fund’. However, as deployment for the sector was lower than expected, SASC decided to consult with the social sector to review the fund offering. Supported by its investors – Social Investment Business Foundation, Big Society Capital and Santander, SASC commissioned Social Enterprise UK to undertake an in-depth consultation to determine the true demand for social investment, uncover potential investment barriers and obtain insight to inform the fund redesign.
Nick Temple, Deputy CEO, Social Enterprise UK, who led the consultation, published the findings in a new report, ‘A Demand-Side View of Social Investment’. The report highlights three major barriers to social investment – the lack of product flexibility, the need for greater risk sharing and the often slow and unclear investment due diligence process.
Temple said, “The research showed that access to finance remains the biggest barrier to social enterprises succeeding. This project presented a tangible opportunity to feed the views of potential investees into the design of a fund - the social investment market has too often focused on supply, so this demand-led approach is welcomed.”
Rick says: “The re-launch of our fund has been a collaborative process. We listened to charities and social enterprises to find out what they really want from social investment. We fine-tuned the existing structure based on their feedback and the new fund is more accessible to a wider range of investees.
“The new fund offers more flexible investment and repayment options, greater risk sharing and more dedicated support and guidance for investees from the start to the end of the investment journey. We hope the new fund will stimulate demand from organisations who want to access social investment to help them flourish.”
Social and Sustainable Capital recently published its first impact report outlining its investments over the past three years.