New Ways to Raise Investment: Social Impact Bonds and Community Shares

1. New Ways to Raise Investment: Social Impact Bonds and Community Shares Sarah Flood, Project Manager 8 September 2011

2. The Social Investment Business • Social enterprise owned by a charity • Large scale UK social investor • 10 year track record • Manage +1400 investments in community orgs, charities, soc ents • Support civil society organisations do more of what they do best • Offering a range of financial products and business support • Driving civil society sector public service delivery by helping to create powerful, well capitalised and thriving organisations

3. Investing in civil society

4. What we believe • We exist to help the third sector do more of what it does best – supporting people and communities most in need • Civil society organisations are often best placed to deliver public services – local, knowledgeable, innovative and flexible • Our mission is to strengthen the sector at both the organisational and strategic level, to be more sustainable, resilient and valued • Social investment is crucial – the market is still young

5. Why we need new ways to raise investment

6. Lack of available social finance/social investment £55.30 Annual funding£billion £13.10 £3.60 £0.30 £0.19 Social investment Corporate giving Philanthropic grant funding Individual giving Bank lending Source: Social venture intermediary survey, The Young Foundation

7. Funding the Big Society

8. The Social Investment Business Experience • Peterborough Social Impact Bond • Headingley Development Trust Community Shares

9. Payment by Results - Social Impact Bonds

10. Community Investment “The sale, or offer for sale, of more than £10,000 of shares or bonds to communities of at least twenty people, to finance ventures serving a community purpose” • A way of raising money from communities through sale of shares or bonds to finance enterprises for community objectives. • Shares are often preferred since share capital doesn’t have to be repaid, and is a more flexible form of capital. • Some orgs are unwilling/unable to issue share capital, bonds are only option. Some have issued both shares and bonds. • Community investment is an unfamiliar concept and often confused with community fundraising. • Plunkett Foundation helped to establish over 180 community-owned shops, most of which used voluntary fundraising to raise capital. Only 10 community-owned stores used community investment to raise additional capital. • Only ¼ of the population directly own shares or bonds, many through demutualisation of building societies and insurance companies, not by active purchase. • 85 examples of CI to date. Among the 41 new initiatives since 1999, the most popular trade activity is renewable energy, followed by community-owned retail stores and community finance. • In the future it can be used to finance any initiative capable of generating attractive financial and social return.

11. Community Investment - Shares and Bonds

12. Community Shares - Example

13. Some of the benefits of new methods of raising investment • Bring in new types of investor • – individual, community, charities, businesses • Financial products/mechanisms to suit range of investors • – short/medium/long term, small/large etc. • Greater community engagement • More focus on outcomes

14. Summary and Conclusions • The social investment market is in its infancy and we are seeing signs of growth. • Need to think about how we all work together to knit new finance mechanisms and the development of new models together.

15. Contact The Social Investment Business • General Enquiries • 0191 261 5200  • Website • www.thesocialinvestmentbusiness.org