Social finance

Everyone’s heard of Cafédirect and Fifteen restaurant group founded by Jamie Oliver, but fewer people realise these are social enterprises.

There are now more than 55,000 organisations like this in the UK, and together they turn over £27 billion and contribute £8.4 billion to the UK economy every year.

Social enterprises are a new model for 21st century business, combining the social and environmental goals of a charity with the processes you find in a successful profit-making firm.

We believe this is the time to transform investment in the social enterprise sector, and that NESTA is uniquely placed to help this happen.

Our approach

NESTA’s approach is well suited to helping develop the social finance market. In a young and fragile sector, modest and co-ordinated experiments can have a catalytic effect.

Where there is good work already underway we will collaborate with other organisations to help promote it more widely, and where there are gaps in the market we will develop, test and share promising new ideas.

Back 2 Earth is based at Hackney City Farm and aims to be a community resource and environmental improvement centre

Some of this work will relate to issues of supply and demand for capital, some will relate to barriers to entry, and some will look at the infrastructure of the market as it currently stands.

We will work both directly and indirectly to help grow the social finance market – directly, by making our own cornerstone investments, and indirectly by sharing what we learn and building new networks.

Over the next three years we will be investing up to £4 million in this programme, and the intention is to ensure that all the projects we back will function as trailblazers for others to follow.

What we will do

NESTA will serve as a market-maker to help the social finance sector mature and grow. Our three-year programme will address the barriers currently restricting the development of risk capital, and explore how these can best be overcome.

On the supply side we will take action on three fronts:

• Increasing access to capital - such as investigating possible sources of capital, exploring different options for structuring social enterprise investment funds, and helping to develop new funds that can demonstrate the value of these approaches.
• Understanding small investors - we will focus our initial efforts on improving understanding of these investors, and then pilot the sort of investment products and services that will appeal to them.
• Helping institutional investors understand social investment - We will use the lessons from our practical trials to help institutional investors understand there is a role for them.

On the demand side the key priority is to encourage the development of strong social enterprises, which will be viable candidates for capital investment by:

• Raising awareness
• Improving investment readiness
• Connecting social entrepreneurs and investors

To find out more about our work in this area, download Capital business: Risk finance for social enterprises