Finance: New report backs social investment

Relatively few foundations engage in social investment, according to a report launched today by the Esmee Fairbairn Foundation.

The report, by Margaret Bolton, urges trusts and foundations to use part of their capital to achieve their charitable purposes.

She argues that social investment includes programme-related investment entailing loans or equity purchases in voluntary organisations that advance the foundation's aims.

"Programme-related investment helps voluntary organisations access capital," says Bolton. "It is generally acknowledged that difficulties accessing capital are hampering voluntary organisations in their efforts to develop new income-generating services."

But the term also encompasses socially responsible investment, where weight is given to social considerations when choosing investments.

"Socially responsible investment allows foundations to invest capital in ways that at worst do not erode, and at best support, the common good," says the report.

It identifies some resistance to social investment among the trustees of foundations, because it often requires the buying in of new types of expertise and a more engaged relationship with recipients that departs from the more traditional grant-making practice.

KEY POINTS

- Social investment is rarely adopted by trusts and foundations

- It includes programme-related investment where foundations provide voluntary organisations with capital

- Socially responsible investment involves selection of stocks to increase income and capital value but with consideration given to social issues

- Some trustees fear social investment will cost more.

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