A lack of targeted guidance for philanthropy funders and social investors is holding back social impact growth, a new report has warned.
In a report published yesterday, the All-Party Parliamentary Group (APPG) on Philanthropy and Social Investment urged the government to implement a series of recommendations to unleash greater giving and social investment.
Among these is the call to work closely with the Charity Commission and Financial Conduct Authority (FCA) to develop targeted guidance and regulation for the philanthropy and social investment sectors.
The APPG also suggested a new “Universal Gift Aid Declaration Database” to allow donors to fill in one online declaration to cover all donations.
‘Missed opportunities’
The APPG said that the “lack of targeted focus” on philanthropy and social investment means that regulatory opportunities to support social impact are missed.
It wrote in the report: “Government could go further and consider whether philanthropy and social investment would be better served by a targeted regulatory regime recognising that funders, donors and social investors are distinct groups within civil society.
“At present, guidance from the Charity Commission and FCA does not fully address the operating practices of these groups nor provide relevant examples. This lack of regulatory clarity drives risk aversion among funders, donors, social investors due to the additional governance costs required to operate in a sphere where regulation and guidance is ambiguous.”
The APPG gave the example of a recent legal case (Butler-Sloss v Charity Commission), where a judge ruled that charities can use their investment portfolios to combat climate change even if this excludes investing in a large part of the market.
It said that the outcome of the case will “open the field further for trust and foundation endowments to be invested in social investments” and highlights the highly reactive nature of regulation for the philanthropy and social investment sector.
The APPG also called for the introduction of a Universal Gift Aid Declaration Database, which would see donors completing a single online declaration to cover all donations.
This, it said, would then be checked by charities and HMRC and help ensure that Gift Aid achieves its full potential.
Philanthropy and social investment need to be ‘harnessed’
Rushanara Ali, MP for Bethnal Green and Bow, Labour, and co-chair of the APPG, said: “The scale of social need we’re facing in the UK will require a government that can work in partnership with all sectors of the economy, including philanthropists and social investors, who support our communities through funding grass root organisations. This is even more important given the ongoing challenges post pandemic and the cost-of-living crisis in our country.”
She added: “Whilst philanthropy and social investment cannot and must not be considered a substitute for government intervention and action, they play an important positive role in society and that needs to be harnessed. The pandemic has shown us that many people who have financial resources keep up their giving to the charities and causes they care about even in uncertain times. Tax, philanthropy and social investment aren’t mutually exclusive and encouraging generosity is not only desirable, it’s essential to ensure stronger communities are at the core of our response to the current economic hardship.”
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