Social investment should break through this year

There has been some progress in making social investment less London-centric, writes Nick Temple

Nick Temple of Social Enterprise UK
Nick Temple of Social Enterprise UK

We are well into the new year and, thanks to a family quiz game over Christmas, I now know that January is named after Janus, the Roman god of beginnings and transitions (and also, less excitingly, gates and doors).

Janus is usually depicted as having two faces - one looking to the past and one to the future. So here's my Janus-like attempt to reflect concisely on the year just gone for social investment, and what to expect in the year ahead.

In retrospect, 2013 felt like a year of two steps forward, two steps back. There has been a huge amount of innovation: new products, services, entrants and intermediaries being established, and rapid and exciting change in what is still a relatively new marketplace. There has been international and political recognition, including a new tax relief, and new support initiatives for those seeking to get investment-ready. And there has been some actual growth: a report, Growing the Social Investment Market, published in July last year, showed a social investment market that had grown to £202m in 2011/12 - an increase of 22 per cent from 2010/11 - in 765 deals across the UK.

But there was also evidence of persistent problems yet to be solved - the same research showed 90 per cent of lending in 2011/12 was still secured loans, at a time when all other research (including a study by Social Enterprise UK) showed that unsecured, risky and smaller-scale investment was what front-line organisations needed. And there was an increasing feeling that social investment might have reached 'peak hype' and was about to dive into a trough of disillusionment about its capacity to provide the finance the sector really needs.

So what to expect in 2014? Here are my five predictions.

- Transparent Social investment can still be a bit difficult to navigate and access, and practical information hard to come by; so we will see the appearance of guides and platforms that aim to address this.

- Local There has been some progress in making social investment less London-centric - notably the regional north east fund from Big Society Capital and Northern Rock, announced in December; and this will continue with community development finance institutions and local impact and investment funds at the forefront.

- Unsecured There is now wide agreement and consensus on the need for more unsecured risk capital for charities and social enterprises, and we will see more funds, initiatives and partnerships that target this in the coming months.

- Retail Crowdfunding is getting going in earnest, but we are yet to see the mainstream product that breaks through to the general public: 2014 might just be the year of the social ISA or equivalent.

- Cross-sector December showed us how social investment might involve all sectors, with one investment fund announcing its first funding round with a local authority pension fund as an investor (Waltham Forest in east London) and Centrica establishing a £10m fund for energy-related social investment. Evidently, this is just the start of the cross-sector collaborations that we'll see.

As ever, I feel duty bound to reiterate that finance is only a tool and a means to an organisation achieving its mission and purpose. Here's hoping that social investment can help many more organisations of different sizes, types and geographies achieve their goals in the coming months.

Nick Temple is director of business and enterprise at Social Enterprise UK

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