Charity trustees need help with social investment, says Charity Commission report

Report written by the Institute for Voluntary Action Research says trustees are nervous about loan finance and are thus too cautious

Charity Commission
Charity Commission

Charity trustees need more support and information to become involved in social investment, according to a report published by the Charity Commission.

The report, Charities and Social Investment, written for the commission by the Institute for Voluntary Action Research, is based on 80 interviews carried out between July 2012 and March 2013 with social investment intermediaries, charities that have made social investment and charities that have received social investment.

The report says that many trustees remain nervous about taking on loan finance. "The investees themselves felt this wariness caused the trustees to take a responsible and risk-based approach," the report says. "Social investment intermediaries, on the other hand, felt that charity investees were being excessively cautious."

It says that investees cited several areas where they needed extra support. "These included the provision of independent advice, tailored support with business planning, peer learning with other charity investees and simple, clear and accessible investment products," the report says.

The commission has published its own analysis of the findings alongside the IVAR report, which says the research suggests a lack of understanding from trustees.

"The evidence provided by this report suggests that charities involved with social investment are sometimes unclear about exactly what is available in this field and what social investment means for them," the analysis says. "This is particularly true of charities in receipt of social investment."

The commission’s analysis says that when it comes to making and receiving investment, some research participants are unaware of the charity law framework that applies to charities.

"Trustees must be able to make informed and independent decisions about any investment they are involved with, either as investees or as investors," it says.

The report says the major drivers for successful social investment by charities are a shared sense of mission, good governance, skilled management and strong relationships between investors and investees. The main barriers are concerns about financial risk and reputational damage, it says.

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