PLACE BASED SOCIAL INVESTMENT: A PROSPECTUS FOR GROWING THE LOCAL SOCIAL ECONOMY

Transcription

1 PLACE BASED SOCIAL INVESTMENT: A PROSPECTUS FOR GROWING THE LOCAL SOCIAL ECONOMY

2 The Social Investment Business Group is made up of the charity, Adventure Capital Fund, and its social enterprise, The Social Investment Business. We are one of the UK s leading social investors and have made over ,200 investments in charities and social enterprises ranging from } in charities and social enterprises ranging from under 5,000 to almost 7 million. We specialise in both community based investment and in providing simple debt products to social purpose organisations operating at both a local and national level. + Copyright September Copyright September 2013

3 Contents Endorsements 4 Foreword 7 Executive Summary 8 1. Rationale 10 Place based social investment 10 Growing demand for social investment in local areas 10 At a time when local resources are being redirected 11 Supporting innovation in public services 13 There is plenty of money out there to support place based social investment 13 But what is lacking is a mechanism to make this happen Vision 14 Adding the social into local economic growth strategies 14 Creating social capital 15 Leveraging social investment into communities 16 Supporting innovation and the creation of social economies Framework 24 Source Support Fund 24 Source 25 Support 27 Fund 28 Learning and evaluation Local Impact Funds 30 What is the structure of a Local Impact Fund? 30 European money 31 National investors 32 Local investors 32 Local Impact Funds 32 Pipeline support 34 Local charities and social enterprises 34 Annex A - Support 36 Annex B - UnLtd support 37 Annex C - References 39 Annex D - Glossary Market 17 The national picture 17 The local picture 18 Local delivery mechanisms 19 Infrastructure support for social economy activity 19 Social Investment Business Group: 10 years of local social investing 19 Where next for local, place-based social investment? 21 3

4 Endorsements I am interested in the opportunity for place based investment to provide communities and social enterprises with the finance they need to build a strong, local economy and create real social benefit. This is a great prospectus by the Social Investment Business Group and I would encourage Local Authorities and Local Enterprise Partnerships to engage with the sector and consider establishing a Local Impact Fund in their area. Nick Hurd MP, Minister for Civil Society Don Foster MP, Minister for Communities and Local Government The government is encouraging and supporting local people to become more involved in the communities in which they live; to take more control over the decisions and services which affect them. I therefore welcome this prospectus. Its message of creating sustainable social investment markets for communities across the country supports Government s vision of devolving responsibility, power and budgets to a local level. Big Society Capital is supportive of the Local Impact Funds model as a helpful mechanism for channelling European structural funds into the social investment market, to help redress significant social problems in local areas and deliver positive social impact. Nick O Donohoe, Chief Executive, Big Society Capital 4

5 UnLtd is really excited by the potential that Local Impact Funds have for helping to build an ecosystem of finance and support in communities. UnLtd is committed to working closely with Social Investment Business Group to ensure that we direct our expertise and support for strategic, wrap around solutions to growing social entrepreneurship in the UK, from startup through incubation and investment readiness to achieving their full potential. Cliff Prior, Chief Executive, UnLtd, the Foundation for Social Entrepreneurs Daniela Barone Soares, Chief Executive Officer, Impetus The Private Equity Foundation Impetus The Private Equity Foundation is pleased to be working with the Social Investment Business Group as we are keen to support more charities and social enterprises that are based in a range of geographical locations. If we are to achieve a real impact on communities and society, a joined-up approach amongst similar-minded intermediaries supporting the social sector is going to become more important as sources of public funding diminish over time. Social Finance has partnered with the Social Investment Business Group on providing social investment to local communities. Together we will be able to support Local Authorities, and other commissioners, that are looking for social enterprise solutions to delivering better public services by providing them with the right kind of investment for their needs. David Hutchison, Chief Executive, Social Finance 5

6 I welcome the concept of Local Impact Funds as a way of stimulating social investment into social enterprises and communities, serving local needs and helping people in some of the most deprived communities across the country. They ll compliment investments CDFIs are already making and in so doing will strengthen the growing community finance market at this critical time. Ben Hughes, Chief Executive, Community Development Finance Association Peter Kyle, Deputy Chief Executive, Association of Chief Executives of Voluntary Organisations (ACEVO) Local Impact Funds could prove a brilliant way of getting loan and grant money to the many great third sector bodies trying to deliver social impact during difficult economic times. Our social fabric is under threat and I hope to see Local Impact Funds being established across the breadth of the UK. It s time we really boosted the social investment market and this can do it. Social Enterprise UK is wholly supportive of Local Impact Funds, which could drive the growth of more social enterprise zones and social enterprise towns in England. Local Impact Funds provide a joined up model of business support and investment that social enterprises across the country need if they are to grow their impact and operations to a bigger scale. Peter Holbrook, Chief Executive, Social Enterprise UK David Frost, Chair, Local Enterprise Partnership Network I am really pleased to see LEPs beginning to engage with the social enterprise movement. Those LEPs that choose to support the establishment of Local Impact Funds in their areas will act as an example of practical ways for working with the social enterprise sector. 6

7 Foreword Social investment has the potential to transform the way society functions by directing money and markets away from purely short term financial gain, and towards a more sustainable kind of activity that places social benefits at the fore, and looks to invest over the long term. The Social Investment Business Group (SIB) is committed to providing simple finance to organisations that demonstrate the strongest social impacts. Over the last ten years we have invested over 320 million in over 1,200 charities and social enterprises that are proving capital can be used to effect positive social change in communities around the UK. We are proud to launch this document, Place based social investment: a prospectus for growing the local social economy, which signals our intention to bring social investment to the organisations and communities that need it the most. The social investment market in the UK is growing at speed, but it is still small, and without a coordinated local approach to investing to bring affordable finance to charities and social enterprises, it will not be able to grow to the scale that many people would like to see. This is why we have committed to helping establish two pilot Local Impact Funds over the next year, and it is why we have built a coalition of support around the concept of place based social investment funds. We aim to show how social investment can be used to scale up social impact in deprived areas, create sustainable growth and jobs in local economies, and drive public service reform towards delivering stronger social outcomes in communities. Sir Stephen Bubb Chair The Social Investment Business Group Jonathan Jenkins Chief Executive The Social Investment Business Group 7

8 Executive Summary There is growing demand across the UK from charities and social enterprises for finance and support to bridge working capital requirements, invest in product development and fuel organisational growth. charities and social enterprises for appropriate finance. Chapter 1 outlines the demand and supply issues, and the rationale for place based social investment. Our experience over ten years of social investing is that charities and social enterprises working in communities require appropriate finance for growth. This experience is reflected in a recent survey that Social Enterprise UK conducted recently, The People s Business, where 39% of surveyed social enterprises cite access to finance as the single largest barrier to their growth and sustainability, the most common barrier experienced. 1 Some estimates calculate that there is an annual funding gap of between 1.3 and 2.1 billion per year. 2 We see at the same time that Big Society Capital (BSC) is beginning to deploy its 600 million, successfully committing in its first year up to 56.6 million of investments in intermediaries and funds that are investing in a range of charities and social enterprises and innovative new social investment products. While this is good news, more needs to be done to find a way of matching the finance that is available with the demand that we are seeing from 1 The People s Business, Social Enterprise UK, July Mind the Finance Gap, CDFA, January 2013 Local Impact Funds can also be seen as an outcome of the broader structural and administrative changes that are beginning to take root in the UK SIB has developed a new financial product that will be critical to bridging the gap between demand and supply: the Local Impact Fund. Local Impact Funds (LIFs) are a local social investment fund product that provides appropriate and tailored support to charities and social enterprises in a local community. Chapter 2 sets out the vision for growing place based social investment in the UK, and how Local Impact Funds provide a locally-led solution to directing the existing supply of finance to where it is most needed. The social investment market in the UK is embryonic, but evolving at pace. Chapter 3 analyses the state of the social investment market in the UK at a national and local level, and drawing on SIB s experience of making social investments over ten years, assesses the future opportunity for local place based social investment. SIB has been at the centre of the social investment movement for the last 10 years and as such has developed strong links with both local and national organisations with aligned aims and 8

9 interests. Chapter 4 outlines the coalition of local and national support that we have assembled to ensure these funds work in local areas. Local Impact Funds have been structured around a premise that investment can only function if it is accompanied by appropriate investment readiness and other business support. This is particularly true of charities and social enterprises where the difficulty of operating as businesses in a difficult economic climate is compounded by the fact that their social mission requires them to act in often the most deprived areas and work with some of the most socially excluded individuals in society. They can only take on repayable investment if they receive targeted support to do so. Chapter 5 describes how Local Impact Funds will do this while maintaining the flexibility to respond to local need. We have designed a new product that can leverage investment from different sources, allowing investors to achieve positive local outcomes though their investment. We are so serious about the value that Local Impact Funds can bring, that we have committed to invest up to 2 million of our own money to support two Local Impact Funds this year, and we will look to invest more of our own money into future funds. The local aspect of the finance will focus minds and energies towards success: people feel pride in their local community, and this product provides a mechanism through which local areas can funnel resources to where they are most needed. We are so serious about the value that Local Impact Funds can bring, that we have committed to invest up to 2 million of our own money to support two Local Impact Funds this year Local Impact Funds can also be seen as an outcome of the broader structural and administrative changes that are beginning to take root in the UK: there is new legislation empowering communities to take responsibility for and ownership over their local issues (Localism Act 2011); commissioners of services are now required to take social value into account when they commission and procure for the delivery of public services (Social Value Act 2012); budgets and expenditure are being delegated from Whitehall to local bodies (Local Enterprise Partnerships and the new City Deals); and the Government s support for innovation in public service delivery (the mutuals agenda, payment by results, the Investment and Contract Readiness Fund and many other initiatives). With so much activity taking place, and so many new opportunities being made available to the sector, it is imperative that we take up the challenge of finding ways of turning these opportunities into lasting solutions for those that need it most. 9

10 1. RATIONALE Place based social investment Place based investment is about the provision of appropriate finance and support to small and medium enterprises that help generate new economic activity and jobs in communities facing economic change or decline, whilst also delivering a financial return to investors. Charities and social enterprises are well placed to deliver economic activity that is socially focused, and social investment can provide them with finance to support sustainable social-economic development in a local community. This is place based social investment. Growing demand for social investment in local areas The potential funding gap for charities and social enterprises in the UK is estimated at 1.3 billion billion annually. 3 In contrast, the provision of social investment to charities and social enterprises was 286 million in The social investment market is growing apace to meet this demand, and is set to grow at an average of 38% annually: up to an estimated 1 billion of done deals in 2016, yet this is not enough to meet the demand from the sector. Evidence indicates that the broader social sector, in particular charities and social enterprises, is well placed to access more social investment in local areas. The social sector receives 7 billion annually from Local Authorities for the services it delivers locally. The estimated reduction in public sector funding to the social sector over the spending review period ( to ) is 3.3 billion. 5 Many charities and social 3 Mind the Finance Gap, CDFA, January The First Billion, BCG, September UK Civil Society Almanac, NCVO

11 enterprises will look to develop existing and new income streams in response to the economic downturn, seeking social investment to cover a range of financing requirements. There are over 163,763 charities in the UK, controlling assets valued at over 36.7 billion. Many of these are organisations already delivering critical services in communities, and are well placed to take advantage of the Localism Act to take on more assets and deliver additional services in their local area. 6 And when compared to mainstream SMEs, it is clear that social enterprises provide a broad range of benefits in areas of the greatest deprivation: almost 38% of social enterprises work in the 20% most deprived communities in the UK, compared to mainstream SMEs, where only 12% are situated in the most deprived areas. 7 Social enterprises are more likely than mainstream SMEs to reinvest profits locally, actively recruit local staff, employing people that are disadvantaged in the labour market from disadvantaged communities. 8 In addition to the broader positive social impact that investing in socially motivated organisations brings, there are impressive economic impacts too. Recent research 9 shows that the net additional economic impact at a regional scale, generated by the 202 million of social investments made in 2011/12, was: 6 UK Civil Society Almanac, NCVO, People s Business, Social Enterprise UK (SEUK), November Fightback Britain, Social Enterprise UK (SEUK), November Growing the social investment market: the landscape and economic impact, ICF GHK in association with BMG Research, July social ventures created / safeguarded. 3,550 FTE jobs created / safeguarded over the whole finance period 23 million in annual GVA contribution at the regional economy level. Evidence indicates, in fact, that every 1 of public sector expenditure invested in social enterprise creates of gross value added. This compares to a lower return of 3.57 across all markets. 10 At a time when local resources are being redirected Local Authorities and other local commissioners, such as the new Clinical Commissioning Groups (CCGs) increasingly have to make tough decisions about where to spend their budgets at a time when demand for public services is growing. 11 The below graph shows projected spending against projected revenue for Local Authorities, from the 2010/11 baseline to 2019/ A gap opens out in 2012/13 at about 1.4 billion in cash and amounts to over 16.5 billion in 2019/20: 10 Evaluation of Community Development Finance Institutions (CDFIs), GHK, March The graph and details below are taken from: Funding outlook for councils from 2010/11 to 2019/20: Preliminary modelling, Local Government Association, June NB: these figures exclude spend for Fire, Police, Housing Benefit and the Dedicated Schools Grant as services with their own precept that all receive differential treatment through the Spending Review. The overall figure for revenue expenditure is 98.4 billion in , a decrease of billion in Local Authorities are budgeting total net current expenditure of 39.2 billion on education services in , 21.2 billion on social care, 19.6 billion on mandatory housing benefits and 11.6 billion on police services. Local Authority Revenue Expenditure and Financing England: Budget, DCLG, July

12 Fig 1: Projected spend against projected revenue for Local Authorities till ,000 Income Net expenditure 55,000 (million) 50,000 45,000 40, / / / / / / / / / /20 This scenario, colloquially known as the graph of doom, is driving Local Authorities towards having to consider new approaches towards public service delivery, including: Local Authorities working together better: Some councils have gone beyond shared back offices and have brought service delivery together in shared organisations that answer to councillors representing more than one area. Service integration: Whole Place Community Budgets bring together the public, private and social sectors within a specific geography to deliver better integrated services that spend money better on what can be shown to improve lives and promote economic growth, whilst also cutting waste and duplication. Spinning services out: In line with the Localism Act and mutualisation agenda of central Government, Local Authorities can support non state actors to deliver services where a local Authority does not have a statutory duty to do so. The NHS budget is also being redirected towards supporting more flexible community based approaches to service delivery. The new 221 new CCGs, set up by the Health and Social Care Act 2012, have replaced the 152 primary care trusts that previously commissioned healthcare services. They have delegated responsibility for 65 billion of the 95 billion NHS commissioning budget to plan and commission hospital, community health and mental health services. 12

13 Supporting innovation in public services New administrative infrastructure coupled with delegated budgets and an imperative to support innovative approaches to public service delivery present unparalleled opportunities for charities and social enterprises. The national Government has set up a range of initiatives to build the capacity of charities and social enterprises so that they are in a strong position to make the most of this new public services environment. These initiatives enable: 6 billion) will be available to help stimulate innovation and sustainable economic growth in some of the most deprived parts of the country. But what is lacking is a mechanism to make this happen So, whilst there is a clear demand and need for social investment to reach into local areas across the country, and whilst there is an availability and supply of finance and support to service this need, there is as yet no clear mechanism for connecting supply and demand. Opening up delivery of public services to charities and social enterprises. Mutualisation of public services, and spinning out of existing activity. Support to improve commissioning and whole place service delivery. Investment readiness and other business support programmes for charities and social enterprises. Payment by results (PbR) schemes. For a full list of relevant initiatives and sources of support for this, see Annex A. There is plenty of money out there to support place based social investment Big Society Capital was launched in April 2012 as a wholesaler capitalised with up to 600 million, and is looking for investable propositions from intermediaries. The round of EU structural funds money (of which the UK portion is estimated at circa 13

14 2. VISION Our vision is for Local Impact Funds to become the product of choice to deliver place-based social investment in the UK. Local Impact Funds are a new social investment product that aims to resolve the market need identified in Chapter 1, by bridging the gap between supply and demand for social investment from local communities: Local Impact Funds will be locally driven, flexible, and responsive to need and context. Local Impact Funds will provide a tailored package of support and finance for charities and social enterprises at all stages of their journey, from start up to sustainability and growth. Local Impact Funds for the first time will draw together into one place an appropriate blend of national and local actors and interventions, achieving more through the sum of its parts. Local Impact Funds are a UK innovation that could support social economic growth anywhere in the world. Adding the social into local economic growth strategies The scale of the opportunity for charities and social enterprises is large. The English Local Authorities alone are seeking more effective ways of delivering circa 98 billion of services annually. CCGs will have delegated budgets of up to 65 billion annually for locally commissioned health and social care services. Many local commissioners are driving innovation in public service delivery, adopting payment by results approaches, taking part in the Whole Place and Neighbourhood Community Budgets pilots, and promoting the mutualisation / spin outs agenda. 14

15 Local Enterprise Partnerships (LEPs) are being made the principal instrument for the UK Government s sub national economic growth strategy. LEPs will disburse Government s forthcoming 10bn Single Growth Pot ( 2bn a year, over ), and the circa 6 billion of EU structural funding for LEPs were established in 2011 in order to promote sub national growth. Some of the 39 LEPs are beginning to develop close links to the charities and social enterprises in their area, and to think about how their economic strategies can take into account the social economy. The Black Country LEP, for instance, is working closely with the Vine Trust social enterprise to create Social Enterprise Zones in the LEP area. The Social Enterprise University Enterprise Network (SEUEN) published a recent report 13 with specific recommendations for how LEPs could do this: 1. Each LEP should have a Social Enterprise Champion on its Board. 2. Each LEP should map social enterprises in their area and talk to local social enterprises about their needs in order to inform the development of locally appropriate support. 3. LEPs should consider a package of support for social enterprises. This may include investment readiness, innovation centres, mentoring and digital data mining. 4. LEPs should develop a project to identify key supply chains in their area and help social enterprises bid for new work / public sector contracts. 5. When developing their EU funding strategy for , LEPs should specifically consider projects which benefit social enterprises, working with other LEP areas. Chapter 4 ( Framework ) and Chapter 5 ( Local Impact Funds ) set out how a joined up ecosystem of support with tailored and engaged investment can support LEPs to deliver on the last four recommendations. Creating social capital As well as delivering economic impacts such as job creation, investing in local social economy activity inspires local communities, and supports social inclusion by amplifying connections within and between individuals and their respective social networks. Social capital creates value by helping build networks, aspiration and opportunity through connecting those with talent, knowledge and resources with those that are looking for opportunities and / or support, resulting in: Creation of new community groups or social networks. Helping people connect with others they might not usually meet. Taking positive action as a group. Promoting neighbourliness and encouraging people to help each other out. Promoting trust within or between communities. Empowering people to get involved in local decision making. 13 Why all LEPs should have social enterprise at the top of their agenda, SEUEN, July 2013 Providing communities with greater access to information. 15

16 UnLtd, the foundation for social entrepreneurs, finds that on average every social entrepreneur it supports through its peer to peer support scheme goes on to provide direct support to a further 10 people looking to start up or grow a social venture 14. Leveraging social investment into communities Local Impact Funds can provide charities and social enterprises with access to the different kinds of finance they need: working capital to support contract delivery, finance for asset purchase, investment into research and development, finance to purchase expertise to develop capacity, systems and more. Supporting innovation and the creation of social economies Place based social investment will result in a more social economy in local areas. Local Impact Funds will provide affordable and appropriate finance, giving charities and social enterprises the finance they so desperately need to grow and improve, and contribute to rebalancing the wider economy by supporting sustainable models and approaches that deliver social as well as economic benefits. Local Impact Funds can also provide tailored business and investment readiness support to ensure that the charities and social enterprises are able to manage the social investment, and report their financial and social performance better. All of this will result in more opportunities for services being delivered by and for the community, with connections into, and support from, the local area, generating employment and multiple other outcomes in that area. 14 Annual Review 2011/12, UnLtd, In addition, 72% of UnLtd award winners encouraged another person to set up a social venture, and 59% supported another social entrepreneur in setting up their venture, either in an informal or formal role. 16

17 3. MARKET The national picture The social investment market is small when compared to other financial markets, but is growing at a significant rate. Recent evidence shows that there were an estimated 180,000 SME social enterprise employers in the UK. They are creating jobs, employing around two million people in 2012 and contributing some 55 billion to the UK economy, bringing wealth into communities and helping to rebuild the economy 15. And this sector is growing. When compared with SMEs, 38% of social enterprises saw an increase in turnover compared with 29% of SMEs, and 22% of social enterprises experienced a decrease compared with 31% of SMEs 16. The role of BSC in accelerating this growth in demand has been critical: within its first year of operations ( ) it had committed over 56 million into 20 different social investment finance intermediaries 17. A report commissioned by Big Society Capital in 2012 indicated that demand for social investment could rise from 165 million worth of done deals in 2011 to 286 million in 2012, 750 million in 2015 and to as much as 1 billion by This amounts to an average 38% growth in demand year on year. 15 Social enterprise: market trends, based upon BIS Small Business Survey 2012, BMG research, Cabinet Office, May The People s Business, SEUK, July Annual Report, BSC, May The First Billion, BCG, September

18 The local picture The landscape at the local level is also evolving as a result of the Government s public service reform agenda. There has been a steady change in levels of voluntary income (grants) and earned income (contracts) from Government funders to charities and social enterprises. From to , grants from government declined from 4.6 billion to 3 billion 19. In contrast, contract income from government was worth 11.2 billion in , a real increase of 6.7 billion (151%) since (when it was worth 4.5 billion) 20. Of the 11.2 billion of services being delivered by charities and social enterprises, only billion currently is from contracts for services at a local level. This constitutes 8.8% of the total value of local government annual expenditure 22 on commissioning and procurement of goods and services and represents the immense potential offered by the Localism Act and other initiatives to encourage people to take on services at a local level. 19 UK Civil Society Almanac, NCVO, UK Civil Society Almanac, NCVO, UK Civil Society Almanac, NCVO, UK Civil Society Almanac, NCVO, 2012 Empower Community Management Sustainable low carbon economy for all Empower Community Management is a profit for purpose company that works with key community stakeholders, such as local authorities, housing associations, church groups and others, to accelerate the transition to sustainable, low carbon local economies. Their key focus is economic and ecological sustainability achieved through a socially inclusive approach. Empower have had a 108,650 grant from the Investment and Contract Readiness Fund (ICRF) to work in partnership with their ICRF provider, Social Finance, to refine their investment offering and legal processes. They started out with an UnLtd grant. With support from the ICRF, they are looking to raise 15m in summer 2013 through an inflation-linked amortising bond with a real yield of 3.5% plus inflation. This quasi-bbb product is a solid, attractive financial tool for institutional investors, with yields based on Feed-in Tariffs. The capital raised through the bond will enable Empower to help over 3,000 households in York and the North East of England access free energy which will save each household at least 250 a year or 2.5% of their average annual income. At least 10m is also expected to return to the community through the participating housing associations and Empower s community development trust to address fuel poverty, reduce the community s carbon footprint, fund local job creation and skills development in the clean power industry. 18

19 Local delivery mechanisms Place based social investment needs an effective delivery mechanism, able to act as an intermediary and honest broker between the range of national and regional investors (including European funders) and local organisations seeking investment. These intermediaries are often referred to as community finance providers, and include Community Development Finance Institutions (CDFIs), Social Investment Finance Intermediaries (SIFIs) and in some cases credit unions. CDFIs form the bulk of local independent social investors, with around 70 existing across all four UK nations. They are constituted as social enterprises that invest in individuals, enterprises and social organisations that are unable to source finance from mainstream providers like banks. They are able to blend a range of funding types from soft, grant based loans through to more traditional commercial loans. This means they structure their own funds so as to be sure of best serving the communities in which they are rooted; they pride themselves on forming strong relationships with those to whom they lend, and in so doing build the confidence, skill and capability of the wider sector. Infrastructure support for social economy activity In cities and communities across the country there are intermediary organisations that incubate and support charities and social enterprises through the provision of customised support, in addition to the provision of finance, such as: Networking opportunities and events. Mentoring. Education. Incubation services. Consulting. Advocacy. Grant funding. These organisations include representative or infrastructure organisations, such as social enterprise networks, community and voluntary services and social enterprise hubs; community anchors such as universities, housing associations, colleges and large local employers; and emerging specialist agencies, such as legal, accounting and other advisory service firms for the social sector. Social Investment Business Group: 10 years of local social investing 23 SIB has made over 1,200 investments (as grants, loans, and equity-like investments) to charities and social enterprises, totalling 320 million over the last ten years, in local communities across the UK. Over 48 million of that has been invested in local or community enterprise in the last ten years through Communitybuilders, the Community Asset and Services Fund and other asset transfer financing. 23 NB: all figures included in this section are valid to 28 February The figures exclude ACF investments, referring to SIB investments only. Figures include grant only funds, such as the Community Asset and Services Fund. 19

20 Future Health and Social Care Association CIC Supporting the most vulnerable people in the community Future Health and Social Care Association CIC (FHSC) began in 1996 with the formation of the Future Housing and Community Care charity. It converted to a CIC (a legal form for social enterprises) in It was founded by concerned members of the African-Caribbean community in Birmingham who felt that the Government s initiative of care in the community was not meeting the needs of those who were most vulnerable, including people with mental health issues and learning difficulties. FHSC wished to move away from reliance on private sector solutions to manage their own properties for tenants that would provide a protected tenancy for 40 service users in fit for purpose properties. It applied to the Social Enterprise Investment Fund for an investment to purchase 30 apartments. The 3.11 million investment consisted of: Approximately 57% of SIB s investments have been made in health and social care and another 20% in community development initiatives (including the purchase of local land and purchase by the community). 44% of SIB s investments were made in areas that were in the 25% most deprived areas in England. These areas include Liverpool, Bradford, Birmingham, Manchester, Walsall, Oldham, Sheffield, Northumberland and London (Tower Hamlets, Hackney). In fact, at least 267 of the 326 English districts have received an investment from SIB, showing how demand from investees for social investment from SIB has wide geographic spread 24. The chart below shows all SIB investments split according to the geographical location of the investee. Fig 2: SIB investments split according to the geographical location of the investee 15% 11% 4% 2,687,400 loan. The loan was made over 20 years at 6% interest rate. 11% 15% 423,000 capital grant. 7% Legal fees associated with the purchases and their fit out costs. FHSE successfully purchased and fitted out the apartments and is repaying the investment. FHSE now provides housing solutions to people with learning disabilities and other vulnerable groups, and currently employs around 120 people. 7% 22% 8% East England North East South West East Midlands North West West Midlands London South East Yorkshire & the Humber This mirrors the findings collected Growing the social investment market: the landscape and economic impact, ICF GHK in association with BMG Research, July 2013: the pattern was of no dominance of one sector, region or social outcome, suggesting there is diversification across the social investment market, p2.

21 The table below shows the ten Local Authorities areas where SIB has made the most significant investments of grants and loans: Local Authority Loan Capital Grant Revenue Grant Grand total Islington m 1.97m 9.25m 23.52m Birmingham 6.20m 3.34m 1.64m 11.24m Liverpool 6.80m 3.07m 0.84m 10.72m Southwark 5.99m 2.46m 1.80m 10.25m Haringey 8.86m 0.58m 0.54m 9.98m Camden 5.44m 1.69m 2.63m 9.76m Manchester 8.18m 0.81m 0.67m 9.66m Sheffield 3.57m 3.87m 1.04m 8.69m Wandsworth m 0.43m 0.59m 8.61m Bradford 5.05m 1.85m 0.89m 7.79m Fig 3: Local Authority areas with the most significant SIB investments From these ten Local Authority areas alone we note: There is good national geographic spread, covering six LEP areas (London, Liverpool City Region, Greater Manchester, Sheffield City Region, Leeds City Region, Greater Birmingham and Solihull). The overall proportion of loan to grant is: 64% / 36% Where next for local, place-based social investment? SIB started the Future Financing Needs survey with its current and prospective investees in July 2012 and has examined future demand for 25 NB: 85% of the investment figure comes from investments in nine large charities. 26 NB: 82% of the investment figure comes from investments in two large charities. investment (debt and equity-like) based on the responses so far. Key findings include: 285 charities and social enterprises have responded so far. There is demand for over 350 million from these 285 responses. 57% of respondents serve a local area (of which 43% serve only a local area and the further 14% serve their locality alongside having a larger geographical reach). 52% of the local organisations had a turnover of over 500,000 in % said that over half of their income in was earned from contracts and other commercial activity. 67% of respondents sought investment of over 100,

22 Respondents were also asked what they were seeking investment for, and the bar chart opposite shows that they seek investment for a range of activity, in particular finance for growth. Alt Valley Community Trust Community enterprise approaches to education Alt Valley Community Trust is a pioneering community anchor organisation established in 1983 as an Educational Charity to support lifelong learning within the Croxteth community. AVCT received two loans from Adventure Capital Fund. The first was a loan for purchase and refurbishment of the Communiversity and the second was a loan for purchase and refurbishment of the Croxteth Sports Centre. The first 200,000 investment consisted of: 100,000 loan charged at 1% interest over a term of 8 years with a 3 year capital holiday. This was repaid in full on 18 May ,000 loan, repayable by evidenced Social Impact, fully evidenced and loan repaid on November The second 220,000 investment consisted of: These investments have allowed AVCT to provide education, employment and health and wellbeing services to the local community in Croxteth via a number of projects including: The Communiversity: adult education, community development, local library, café. The Skills Centre (Alt Valley Community College): post 16 education and vocational training. The Sports & Wellbeing Centre: membership gym, health and wellbeing activities. The Sports and Tech blocks of the former local school (which are now leased from Liverpool Community College) providing sports and vocational training through apprenticeships in construction and catering. Research conducted by the Joseph Rowntree Foundation ( Rebalancing Local Communities, October 2010) identified AVCT as a key factor that had influenced improvement in Croxteth. 176,000 loan charged at 6% repayable over 10 years with a 2 year capital holiday. 44,000 grant. 22

23 Fig 4: How respondents to the Future Financing Needs survey intend to use their proposed investment Buy or refurbish an asset 76 Proposed use of investment Grow an existing service Start a new service Become investment ready Real Ideas Organisation CIC Scaling up impact, entrepreneurship and innovation Investment and Contract Readiness Fund grants are used by social ventures to purchase specialist investment readiness and / or contract readiness support from accredited providers, to help them raise over 500,000 of investment or 1 million of new contracts. An application for 117,000 from the Real Ideas Organisation CIC (RIO) to raise 600,000 of investment illustrates the scalable potential of much social enterprise activity. The SEQ is scalable, potentially creating opportunities for all young people in the UK and beyond to develop the skills and knowledge to set up and run a social enterprise project while they are at school, hopefully significantly increasing the numbers choosing ethical and socially driven businesses to work in or set up once they are adults. Over the last ten years SIB has invested 27.9 million into social enterprises across 33 Local Authority areas in the South West, of which 9 million has been invested in 14 Local Authority areas that are within the top 25% most deprived areas of England. RIO develops creative social enterprise learning for school age young people, and one of its products is the Social Enterprise Qualification (SEQ). The SEQ is currently the only Level 2 accredited framework for social enterprise in the UK. 23

24 4. FRAMEWORK Source Support Fund The Local Impact Fund offer is simple - to provide a package of support that includes: Pipeline development in a local area to be sure that charities and social enterprises are in a strong enough position to take on repayable finance. Referrals and partnership working to ensure charities and social enterprises have access to the wider ecosystem of support available to them. Financing and engaged investment so that charities and social enterprises receive the finance they need and are supported to manage repayments appropriately. Fig 5: The Local Impact Fund framework Evaluation SOURCE SUPPORT FUND Learning 24

25 The model on the previous page shows the different components of the offer and below is outlined some of the different partners needed to help ensure the approach succeeds. For a Local Impact Fund to work over the long term, a model of support and finance needs to be designed that helps source investable charities and social enterprises, identify potential future investees, and assess their support needs; that can support charities and social enterprises on their journey towards growth and sustainability, drawing on existing support, and designing new support structures where relevant; and that can fund them in a way that is flexible and responsive to their needs, not the needs of investors. Source The first stage of establishing a fund starts with an understanding of the context and environment we want to work in. Some of the key requirements and indicators that should be considered before engaging with a local area include: Requirement Evidence of social enterprise demand for social investment Evidence of substantial demand for social change Evidence of infrastructure support for social enterprises Evidence of an investment culture in the area Evidence of public service innovation Key Indicator Local research Investee data from social investment finance intermediaries Multiple Deprivation Index (MDI) data Other local data Representative organisations in the area Business support funds / initiatives Public / private investment in similar initiatives Other social investment finance intermediaries Payment by results activity, spin outs, use of the Localism Bill, involvement in Whole Place Community Budgets, etc. Fig 6: Key requirements when engaging with a local area If a local area meets these requirements, the next stage is to analyse the local context, including: Social issues in the area. Ability of charities and social enterprises to act in new public services markets. Sustainability of charities and social enterprises through diversified income sources. Demand for social investment from charities and social enterprises. Supply of social investment for a potential Local Impact Fund. Support to charities and social enterprises to access social investment. 25

26 ACEVO Solutions and SIB have agreed to work together to analyse local needs and map the demand for Local Impact Funds. The Vine Trust Building a local social economy for the long term The Vine Trust (VT) is a faith inspired Social Enterprise working to improve the lives of hard to reach young people in Walsall. Since it was established in 1989, its perseverance in driving local social change was recognised with a SEUK nomination for best Social Enterprise town in The longer term aim for VT is to create a Social Enterprise Hub town model for other areas to replicate. VT originally came to SIB for investment in 2007 to develop a new community hub some 30 metres from its existing main building in central Walsall. Included in the hub is a new building, Goldmine, which was completed in late 2012 and which has become VT s flagship education centre expanding on the work of their existing successful Pupil Referral Unit. Over the last six years VT has received investment and support from Communitybuilders (CB), Futurebuilders (FB) and the Investment and Contract Readiness Fund (ICRF): VT received a total of 1.9 million ( 1.26 million loan and 0.63 million grant) from CB in 2008 for the purpose of funding the purchase of land and buildings to create the Goldmine. VT received a total of 215,500 ( 141,000 loan and 74,500 grant) from FB in 2009 to cover the cost of the stamp duty and legal / professional fees for the Goldmine. VT won a 97,280 award from the ICRF in early 2013 to procure specialist support to help them raise over 1 million of new investment to acquire and re-fit new buildings in the area. VT has supported the establishment of four social enterprise zones in the West Midlands, and has put the Black Country LEP and the West of England LEP at the forefront of engagement with social enterprise. 26

27 Support Local Impact Funds will work with the whole range of charities and social enterprises in a local community, from start-ups to established businesses. In order for potential investees to be made aware of the opportunity, and given adequate information, it is critical to engage with the right local representative bodies. Big Lottery Fund and SIB have agreed to improve signposting and joint working on their respective pipeline development funds to simplify the customer journey for charities and social enterprises. Social Enterprise UK and SIB have agreed to link Local Impact Funds into the broader Social Enterprise Zones campaign, as part of a wrapper of local social economy activity. Impetus The Private Equity Foundation is pleased to be working with the Social Investment Business to support more charities and social enterprises across the country. With traditional sources of public funding diminishing, a joined-up approach from organisations supporting the social sector is an essential component of allowing social investment to make a real impact on communities and society. A Local Impact Fund should start with the Social Enterprise Network, local VCSE representative organisation, CDFI or other local champion for charities and social enterprises seeking social investment. These bodies are likely to have the closest and most personal, or on the ground, relationships with potential investees, and their support is critical if a Local Impact Fund is to work in a local community. The following stakeholders will also, no doubt, have aligned interests around place based social investment, and may be counted on to support the establishment of a Local Impact Fund: Local commissioners: such as the Local Authority, the CCG and the LEP. Local business community: such as the local Chambers of Commerce, Enterprise Agencies, Business in the Community. Local lending institutions such as CDFIs, SIFIs, some local authorities and credit unions. National social enterprise support: such as UnLtd, the School for Social Entrepreneurs, the Plunkett Foundation, the Community Development Finance Association, and the Big Lottery Fund. National representative bodies: such as Social Enterprise UK, Co-operatives UK, NCVO, ACEVO and the CDFA. Some areas will already have established programmes and networks of local support. For a Local Impact Fund to make best use of existing local and national resources, a joined up programme of pipeline development activity should be drawn up, with new resources directed at filling in the gaps identified in a local area. Combining existing local resources, best practice, knowledge and experience can build up a local programme of support from start up through to investment readiness. 27