The potential of social investment to change the charity sector has been overstated, but it still remains an important funding option for charities, Sir Harvey McGrath, chair of Big Society Capital, told the Lords Select Committee on Charities yesterday.
Asked by the committee whether too many grand claims had been made about social investment, McGrath compared the size of the social investment market – which Big Society Capital estimates to be worth £1.5bn – with the £16bn in grants handed to the sector each year.
Despite this relatively small size, McGrath said, social investment was an important and growing part of the overall funding mix.
"Expectations have been overstated in the past about the potential for social investment as a funding stream for social sector organisations," he said.
"That said, I do think there is good potential for this to continue to grow as part of the funding mix for social sector organisations".
Cliff Prior, chief executive of Big Society Capital, who appeared alongside McGrath at the committee, said social investment had to become as diverse as the charity sector if it was to become more popular.
He said: "For social investment to work for the charity sector, it needs to be just as diverse. It is wonderful to have institutional capital and it’s wonderful to have charity bonds for organisations that can do that. But it’s also wonderful to have crowdfunding and angel investment.
"I think my one wish would be to unlock all of those opportunities and for social investment to be just as diverse as charity is."
Also speaking at the committee yesterday, Nick Pickles, UK head of policy at Twitter, and David Skelton, public policy and government relations manager at Google, said that although there were a lot of good examples of pioneering digital work in the charity sector, much work was still required to improve the sector’s use of technology.
Pickles said there were similar differences between organisations in the business world in terms of their proficiency with social media, and in many cases smaller organisations "can embrace technology quicker" than larger charities.
He said that increasing confidence in digital technology among charities was crucial.
"If you are already doing marketing, if you already go to speak at public events, social media is an extension of that – it’s not something different," Pickles said. "So a lot of it is building confidence and skills."
Skelton said: "There is some really world-leading work done in charities. I think a lot of people who work in charities are social innovators, and a lot of that innovation is really important.
"I think it is important for all charities to realise that digital is a really key part of achieving their fundamental goals."
Pickles said the internet had led to a proliferation of "micro-charities" and this had changed the nature of the sector.
"They’re working more like start-ups, and less like large charities that move slowly," he said.
Dawn Austwick, chief executive of the Big Lottery Fund, told the committee that the charity sector was experiencing "greater insecurity and instability".
She said: "Our desired state would be that charities are resilient and sustainable and have reasonably strong balance sheets based on developing financial strategies. I think there is more risk now that charities become shorter-term and have less stability."