Special Roundtable Report: Is philanthropy ‘just giving’?

Special Roundtable Report: Is philanthropy ‘just giving’?

News

Richard Bendell, executive director of the European Association for Philanthropy and Giving (EAPG), writes on their recent roundtable Is Philanthropy ‘Just Giving’

“Social investment and social enterprise have often been characterised as alternatives to philanthropy, valued by entrepreneurial ‘new philanthropists’ and ethically minded investors but of limited utility to a broader spectrum of donors and non-profits seeking to leverage greater social impact. However, at a EAPG recent roundtable, discussion focused on the extent to which third sector organisations are responding to demand for new forms of investment and engagement. By drawing on a diverse range of perspectives, the discussion panel sought to question the prevailing view of philanthropy as ‘just giving’, and provoke new thinking about the relevance of social investment options to mainstream charities, wealth advisers and philanthropists.

“After a short introduction by chair Caroline Hartnell (editor of Alliance magazine), Danyal Sattar of the Esmee Fairbairn Foundation outlined the development of their £20m Finance Fund. He emphasised that, from the foundation’s perspective, social investment is another valuable weapon in their armoury, enabling them to respond appropriately to the needs of grantees at a time when there is a distinct lack of sustainable finance in the sector. Danyal suggested that more foundations should be investing in the key intermediaries responsible for developing this market, and noted the need to develop a framework to measure the impact of social investment and enterprise.

“Nick Sireau, executive director of the social enterprise SolarAid, also noted the key role of intermediaries and foundations in this space, indicating that SolarAid’s complex business model leverages revenue-sharing agreements with Venturesome and grant-makers against investment from a number of high net worth individuals. He underlined that grant funding had been vital in allowing SolarAid to set up its basic infrastructure and reduce the overall risk of investment, but that their greatest need moving forward was working capital for stock as they scale up their micro-enterprise model.  Nick noted that a huge benefit of the enterprise model they have adopted is that is aligns the success of SolarAid with that of the entrepreneurial micro-franchisees it is working with in rural Africa.

“Malcolm Fleming emphasised that, in comparison to SolarAid, Oxfam is taking relatively ‘baby steps’ in this area through its Enterprise Development Programme (EDP), which adopts a market-led approach designed to offer greater engagement to new philanthropists and other entrepreneurs. Malcolm noted that it would be impossible for Oxfam to reach its target of exiting these investments in a three to five-year period without utilising loans, which are key to developing commercial expertise within the recipient organisations and leaving them in a position where they can access commercial capital. Malcolm suggested that any large INGO should be looking at how it can move into loans-based investment and utilise this to develop stronger relationships with donors, but also noted the need to resist mission drift.

“As head of charities and social enterprise at Bates Wells & Braithwaite, Stephen Lloyd indicated that he now advises a number of significant social enterprises and intermediaries including Social Finance, Bridges, and Big Issue Invest, whereas 15 to 20 years ago this sector was a blank book in the UK. However, he still questions whether there is a sufficient number of social entrepreneurs for investors to put their money in, or ‘deal flow’ in venture capital parlance. Stephen also highlighted the need to introduce tax reliefs that bring social investment on a par with outright gifts or investments in high growth companies.

“Malcolm Hayday, chief executive of Charity Bank, echoed Stephen’s comments and pointed out that the precursor to Charity Bank, Investors in Society, had been set up by the Charities Aid Foundation (CAF) to fill a gap in the supply side of the market, despite claims by commercial banks that there was no demand. He also identified the need to dispel the myth that charities and social enterprises are high risk investments. He drew on Charity Bank’s experience to emphasise this point, noting that of the £90m they have managed, making loans to organisations with an annual turnover ranging from £5,000 to £2m, only 0.3% of their investments have led to bad debt experiences.

“A major theme throughout this wide-ranging discussion was the need for greater collaboration between different actors in this space. As advisors, intermediaries and non-profits continue to explore the opportunities for joint working to develop the UK philanthropy market, it would appear that a parallel effort may be needed to develop a range of social investment options that will meet the needs of philanthropists and unlock greater support for charities and social enterprises at a challenging time.”

A full summary of the roundtable and details of future EAPG events on philanthropy and social investment topics can be found at www.eapg.org.uk.