The National Council for Voluntary Organisations website provides an excellent introduction to the issue of Social investment, which is an investment activity that has an expectation of both a social outcome and a financial return, which would usually be below market rate. For voluntary organisations, it represents a form of repayable finance that can be used for capital investment, revenue funding development, capacity building, or other ways of improving their sustainability.
Social investment can take the form of:
- A loan, usually a secured loan
- equity (only if the organisation is constituted with a shareholding structure)
- Quasi-equity where the lender takes their returns as a proportion of the organisation’s
- future revenue
- overdraft facilities
Social impact bonds where investors put forward the capital required to run a project, and are repaid by the commissioner (usually government) based on the results – or social impact – of the delivery organisation (often a charity). Read more here