Social enterprises 'miss out on millions'

Most are not set up to receive investment, say experts

Social businesses are missing out on tens of millions of pounds because they do not have the structures in place to receive investment, according to top investment professionals at a round table set up by sustainable finance organisation Uksif.

The meeting was told that managers of socially responsible investment funds wanted to put more money into high-impact investments, but were often unable to do so because potential investees lacked corporate governance, legal structures that facilitated investment and an effective mechanism to measure their price.

Other delegates at the meeting, hosted by not-for-profit investor CCLA, said potential social investments were often too small scale to be cost-effective. "It's a highly fragmented area and there are no clear models," said Mark Mansley, investment director at Rathbone Greenbank Investments.

"There are a lot of issues around regulation, and our compliance department would simply not allow a lot of these investments."

Another investment manager, who asked not to be named, said that wealthy clients would often be interested in making investments, but their advisers would stop it because potential deals lacked the financial security they needed.

Intermediaries working to bring more money into the sector said that progress had been made on solving these problems.

"Social business has been poor in areas such as investor relations," said Rod Schwartz, chief executive of online social business marketplace ClearlySo. "But interaction with professional investors will improve it."

He said that a number of mechanisms could improve the ability of social businesses to access capital, including a private equity fund to invest in social enterprise and a social investment wholesale bank.

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