Charities Aid Foundation launches new social investment fund

Interest in philanthropy is at an all time high and with many major donors looking for new ways to help charities and achieve the maximum impact with their donations, the Charities Aid Foundation (CAF) has launched a new social investment fund, the CAF Social Impact Fund.

Philanthropists can invest their charitable capital in the fund which will provide loans for charities to help them become stronger and expand, it said. Once loans are repaid the funds will be recycled enabling philanthropists to support more charities.

In simple terms, social investment means using funds to achieve both a social and a financial return. Since 2002, the Charities Aid Foundation has, through its social investment arm CAF Venturesome, provided over £22 million in loans to over 280 charities, community groups and social enterprises.

The funds have provided working capital, underwriting facilities and bridging loans to charities, which traditional lenders are unlikely to provide because they are perceived as too risky. To date those who have financed these loans have been grant making organisations, businesses and a handful of individuals. The CAF Social Impact Fund widens this potential pool of funders, allowing all major donors to use their philanthropic capital for a social return, CAF explained.

Donors who already hold, or open a CAF Charitable Trust will be able to make an investment into the fund of £10,000 or more for a fixed period of between three and six years. When the term is completed, CAF Venturesome expects the funds to be returned to the investor's charitable trust in full for them to either reinvest in the CAF Social Impact Fund, or to donate to charities in the traditional way.

Chief executive John Low said CAF Venturesome has an excellent track record with less than four percent of defaults on their loans across the risk spectrum. The CAF Social Impact Fund will provide loans to the lower end of this spectrum.
 
Each application will go through a thorough due diligence process with an independent investment committee reviewing every application. Before a charity formally applies, CAF Venturesome will also spend time with them ensuring they are both ‘investment ready’ and that the investment will achieve a significant social return and has a clear charitable benefit. Investors will be sent regular reports describing the impact their money is having.

A £50,000 investment by a higher rate tax payer returning their tax relief to their CAF Trust account, could mean £83,898 becoming available for the CAF Social Impact Fund to lend to charities. In the past CAF Venturesome has used funds twice over three years and around three times over five years by entering into new loans once the initial loan has been repaid. CAF said that in this way a £50,000 investment could result in over £150,000 being loaned to charities over three years, or over £220,000 over five years.

‘Charities often find it difficult to get finance from mainstream lenders. Yet finance is key to helping charities build a strong and stable position and grow to meet increased demand, or expand their services,’ said Low.

‘Major donors are becoming more interested in the innovative ways in which they can help charities and achieve a greater social impact with their charitable donations.  I hope that through the CAF Impact Fund hundreds of charities will be strengthened and donors will enjoy seeing their money help many more charities and social enterprises,’ he added.