Social Investment is any investment in a charity that provides the investor with a financial as well as a social return, such as the 2011 Scope retail bond and the recent Mencap / Golden Lane Housing bond. The financial return can be in the form of interest or through the provision of other benefits. The recent Jockey Club bond, for example, offered Investors 4.75 per cent in cash and a further 3 per cent in the form of Rewards4Racing points, which can be used to get discount tickets, hospitality packages and race cards at the Jockey Club’s race courses.
It might seem counter-intuitive for a charity to explore a fundraising route that costs it money when the traditional donation route is free. The big question, of course, is whether the existence of these products will result in a fall in donations? While it is too early to draw conclusions, the evidence from charities that have gone down this route seems to suggest that social investment reaches out to a new pot of investors who would not otherwise have donated. These investors are happy to provide a charity with the use of their money for a fixed period and for a fixed return, but may not be in a position to (or yet be convinced to) make an outright donation.
Rather than seeing this as a threat, social investment offers an opportunity to engage with a new class of investor over an extended period. The ultimate prize is to convince the investor to convert their investment to a gift at the end of the bond period - the best of both worlds.