Ten foundations with endowments exceeding £100m are responsible for nearly 90 per cent of social investment by charitable trusts and foundations in the UK, new research by the Association of Charitable Foundations shows.
Researchers found that the Esmée Fairbairn Foundation alone has been responsible for about 45 per cent of all the deals made by foundations, spending £5m a year on social investments on top of the £32.5m it gives in grants.
A briefing document, Charitable Trusts and Foundations’ Engagement in the Social Investment Market, published today to coincide with the ACF’s annual conference in London, is based on a survey of 83 trusts and foundations, and interviews with key figures in the sector.
Charitable foundations, even those with large endowments, often have small staff teams, which makes it difficult for them to get involved with social investment, the briefing says.
ACF data shows that most foundations with endowments of up to £50m have no staff or operate with trustees supported by a single, sometimes part-time employee, the paper says.
The survey of foundations shows 23 that are active in social investment and the ACF estimates that no more than 30 in total are involved in the market.
The trusts and foundations have allocated at least £100m to the social investment market, of which about £50m has been committed to specific deals.
According to the ACF, the research is the first to investigate the approaches and motivations of trusts and foundations in relation to social investments.
Investments typically tend to be loans made directly to voluntary organisations that find it hard to access mainstream finance, the report says.
The survey says that the vast majority of respondents see social investments as supplementary to grant-giving rather than as a replacement.
David Emerson, chief executive of the ACF, said: "Trusts and foundations are one of the few sources of genuine risk capital for social enterprises and charities that cannot attract capital investment from mainstream lenders, and it is vital that their role be both appreciated and understood.
"But increasingly we are aware that foundations – one of the few remaining sources of grant-making – are using their resources to achieve impact in a wide variety of ways. Whether it be the provision of consultants, networking and convening, or the sharing of best practice, there are any number of decisions for trustees to make that go far beyond those related only to funding."