Local Impact Funds can help direct EU funding towards social and economic investment in local areas. They combine business support and growth investment using European Structural and Investment Funds to leverage private capital. Two pilot Local Impact Funds are being established in Liverpool City Region and Northamptonshire to test the model. Lessons from previous funds in places like Kent and Wales show they provide flexible financing to social enterprises and create local jobs and social impact.

1. PLACE BASED SOCIAL
INVESTMENT
&
THE GROWTH OF LOCAL
SOCIAL ECONOMIES
LOCAL IMPACT FUNDS

2.  General introduction
Azlina Bulmer
Programmes and Development Manager
The Charity Bank
 Lessons and thoughts from the 2000 – 2006 and 2007 – 13 programmes
Ann Oldroyd
Former Chief Executive
The Key Fund
 Developing the two Local Impact Fund pilots
Chris Dadson
Business Development Manager
The Social Investment Business Group
Speakers

3. Azlina Bulmer
Charity Bank
GENERAL INTRODUCTION

4. This presentation describes how a ‘Local Impact Fund’ financial instrument can help direct EU
monies towards investment into local places to increase positive social and economic activity.
This is known as ‘place based social investment’, and can help support EU objectives to increase
jobs and growth in local areas, grow a social economy and support social entrepreneurship.
Local Impact Funds are a key mechanism for delivering place based social investment. They:
• Combine (i) wrap around business support with (ii) growth investment.
• Use European Structural and Investment Funds (ESIF) to leverage private (social) match.
• Connect European, national and local supply of monies, with local demand for finance.
• Support local economic and public services strategies.
There are existing examples and case studies showing how social investment has achieved this
in the 2007-13 EU programme.
There are two pilot Local Impact Funds being established to test the instrument and extract
learning and lessons. These have an expected launch date of December 2013.
Executive summary

5. Charities and social enterprises make a positive difference to society and the economy
• 38% of social enterprises work in the 20% most deprived communities in the UK (compared
to only 12% of SMEs). [The People’s Business, SEUK, July 2013]
• £1 of public spend into social enterprises creates £6.25-£8.33 of GVA (compared to £3.57
across all markets). [Evaluation of CDFIs, GHK, 2010]
There is a massive unmet demand for social investment
• The funding gap for charities and social enterprises in the UK is estimated at £1.3 bn - £2.1 bn
annually, in contrast, the amount of social investment deals made in 2012 was £286 million.
• The social investment market is set to grow at an average of 38% annually up to an estimated
£1 bn of done deals in 2016, yet this is not enough to meet the demand from the sector.
There is money available to grow the supply of social investment
• Big Society Capital (BSC) was launched in 2012 as a wholesaler with up to £600 m, looking to
(i) invest in social investment intermediaries / funds, (ii) attract new investors into the sector.
• The UK allocation of the 2014-20 ESIF, estimated at c. £6 bn, can help stimulate innovation
and sustainable economic growth in some of the most deprived parts of the country.
What is now needed are the mechanisms for connecting supply to demand…
Context and rationale

6. Vision
• 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 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 will support social economic growth anywhere in the world, therefore
learning should be shared with interested partners across Europe.
Proposal
• Local Impact Funds to become a major new financial product for the sector.
• 2 pilot Local Impact Funds to be established in late 2013.
• All LEPs to consider establishing a Local Impact Fund in their area in 2014-20.
• For Local Impact Funds to build on existing local and national infrastructure and business
support, thereby enhancing and not duplicating the activity of local organisations.
• Local and national investors to gain confidence in the instrument, so that in time new
investors can replace ESIF and help grow a local social economy.
Vision and proposal

7. Framework
• Source investable charities and
social enterprises, identify
potential future investees, and
assess their support needs.
• Support charities and social
enterprises on their journey
towards growth and
sustainability, drawing on existing
support, and designing new
support structures where
relevant.
• Fund them in a way that is flexible
and responsive to their needs, not
the needs of investors.
For a Local Impact Fund to work over the long term, a model of support and finance should be
designed that helps:
• Encourage continuous learning and evaluates what works best in a local area.

8. Local Impact Funds model*
*This diagram is for demonstration purposes, and the
figures and amounts may be different in practice
Local Impact Fund
National social
investors
Charities and
social
enterprises Beneficiary
Intervention
Investor
Money
Expertise
Close link
KEY
Local social
investors
Big Society
Capital
TBC
LEP
(structural
funds) TBC
Pipeline
support
Equity/debt
Grant
Grant makers
Grant
Key Questions:
1. Terms of EU money?
(pari passu? Grant
component? First loss?)
2. How much pipeline
support is needed?
3. Who pays for costs?
• Set up costs.
• Legal costs.
• Evaluation

9. The Fund Manager
• Local Enterprise Partnerships (LEPs) will have to chose an appropriate Fund Manager to
deliver the Local Impact Fund.
• The Fund Manager could be a:
o Social investment finance intermediary (SIFI)
o Community Development Finance Institution (CDFI)
o For profit fund manager.
• LEPs may have existing relationships with local, national or international organisations that
they will want to draw on, to help them establish a Local Impact Fund.
• Otherwise, LEPs could speak to the following organisations for advice on the matter:
o Big Society Capital (BSC)
o Social Enterprise UK (SEUK)
o Community Development Finance Association (CDFA)
o National Council for Voluntary Associations (NCVO)
o Association for Chief Executives of Voluntary Organisations (ACEVO).

10. Different investors are interested in different outputs and outcomes
Measuring performance
EU monies Social investors For profit investors
• Outputs, results and
impacts (as below)
• Financial performance
• Social performance
• Financial performance
EU outputs, results and impacts
• Jobs created.
• Jobs safeguarded.
• Social enterprises assisted.
• Businesses assisted to improve. performance.
• Private sector investment leveraged.
• Increase in Gross Value Added (GVA).
• Increase in employment.
• Change in employment rate in target areas or
target groups.
• Net additional employment in additional
areas.
Social performance
• Understand the change you want to
make and who you want to make it to.
• Big Society Capital has a helpful
outcomes matrix that you can consult to
help you design a measurement system.
Financial performance
• Measure results in monetary terms.
• Reflected in an income and expenditure
report.
• Results are also reflected in the charity
/ social enterprise return on investment.

11. Key milestones
April 2013 Local Impact Funds referenced in BIS preliminary guidance to LEPs
July 2013 Local Impact Funds included in supplementary guidance to LEPs
Sept – Dec 2013 Information sharing events
December 2013 Launch of the 2 pilot Local Impact Funds
January 2014 Gain EC agreement for operational programmes
Mar - Sept 2014 LEPs to commission proposals for Local Impact Funds, as relevant
Autumn 2014 First full Local Impact Funds become established
2015 – 2020 Local Impact Funds rolled out across England.
Aspiration for 10 – 20 Local Impact Funds to be created

12. Sam Tarff
Key Fund
Lessons and thoughts from Key Fund

13. Key Fund’s 12 year Experience of managing
Local impact funds with ERDF
• Key Fund is a CDFI specialising in distributing EU & UK
funds to the Social Sector in the North.
• Total ERDF/ESF £33.6m - £22.6m in Loans 11m in
Grants
• Match Funding from Public (SRB,NR,CRT) and Private
sources (RBS, Unity)
• 2000 - Organisations invested, 175 - New Start
Ups, 1882 - Jobs Created/ Safeguarded, 6500 - Training
Opportunities
• Lead body on Social Incubator North & £20m ERDF
Consortium in Y&H
• 75% of investment in 10% most Deprived areas

14. Key Fund’s Experience of managing
Local impact funds with ERDF
• Sector needs ‘Patient Capital’ Fast, Flexible and risk friendly
investments.
• Managing ERDF & ESF programmes is complex, requiring
highly skilled staff , well development admin capacity
• Local market knowledge and understanding of the needs of
Social Sector is essential to avoid investment mismatches
• Success is reliant upon a mix of funding & support, good
referral relationships i.e. Charity Bank and other investors
• Effective use of ERDF requires subsidy to create investment
readiness capacity in the sector and a sustainable legacy for
CDFIs

15. Chris Dadson
Social Investment Business
Group
THE 2 PILOTS

16. 1. The Liverpool City Region (LCR) Impact Fund is being designed as a partnership between
Social Investment Business Group (SIB) and Social Enterprise North West (SENW).
2. We are looking to launch the £4m 18 month pilot Fund by the end of December 2013, to
invest into c.40 charities and social enterprises by June 2015.
3. This pilot draws on existing ERDF investment from the 2007-13 programme, and is being
accessed through an existing project: Big Enterprise in Communities (BEiC) programme.
4. BEiC is a £7m business support programme for Liverpool City Region being run by
SENW, and will provide the Fund with a pipeline of investable organisations.
5. We are in the process of seeking approval for a £1m ERDF investment into the Fund, which
could potentially leverage up the same amount three times over.
6. SIB will match this ERDF investment with an investment from our Communitybuilders
endowment, then submit an application to Big Society Capital (BSC) for further investment.
Liverpool City Region Impact Fund

17. 1. The Northamptonshire Impact Fund is being developed in partnership between SIB, the
University of Northampton and UnLtd.
2. We are looking to launch the c. £6m 18 month pilot Fund by the end of December 2013.
3. As there is no ERDF investment from the 2007-13 programme to access for this, other
investors have been approached: local public and private investors have committed £2m.
4. This Fund will support charities and social enterprises around the service transformation
agenda, helping them deliver more contracts in public service markets’.
5. An ‘ecosystem of support’ is being designed alongside this Fund, building on existing
support that the University of Northampton and UnLtd already provide to social enterprises.
6. SIB will also invest in this Fund, and submit an application to BSC for further investment.
Northamptonshire Impact Fund

18. ANNEXES
Case studies
1.Key Fund
2.CDFI 2
3.CDFI 3
4.Kent Big Society Fund
5.Communities Investment Fund, Wales

19. Annex 4
Kent Big Society Fund – case study
Place specific issues?
 Kent is a large and diverse county:
• Rural and urban communities.
• Pockets of deprivation.
• Limited social enterprise presence.
• Linked to broader KCC support for
enterprise.
Background
 Kent County Council (KCC) established a Big
Society Fund in January 2012, to provide:
• Support to transition grant dependent
social enterprises towards sustainability.
• A mix of soft loan and grant support.
• £3 million investment over 3 years.
• Create jobs and social value in the area.
Fund details
 Managed by the local Community
Foundation. 1 FTE managing process.
 Key Fund support (due diligence on
applications, use of docs /processes).
 No demand yet to divert HNWI money to
this: they are interested in thematic areas.
 No close date to Fund. Profiled as 5 year
scenario based on current experience.
Financials
 £350k invested to date.
 £1.7 million worth of specific interest.
 Provides soft loans of £10k - £100k.
 Grant element of up to 10%, if necessary.
 Start ups receive more intensive support.
 Loans up to 5 years, repayment holidays.
 Flat 5% fixed interest on loans.
 4% management fee immediate on all loans.
 4% fund management fee from KCC.

20. Annex 5
Communities Investment Fund, Wales – case study
Place specific issues?
 Covers the West Wales and the Valleys
area:
• Receives Convergence funding.
• Mix of Rural and Urban deprivation.
• Isolated communities with poor
infrastructure.
Background
 Wales Council for Voluntary Action
(WCVA), created Communities Investment
Fund (CIF) to provide:
 Patient capital loans to SSOs in Wales in
2006.
 Some grant available to make SSOs
investment ready.
 Target to create jobs and social impact.
Fund details
 Managed by WCVA.
 Independent Credit Committee review all
applications.
 Using ERDF investment and recycling into
further investments.
 Current allocations to be made by Mar ’14.
 Close working with Welsh Government for
successor fund post 2014.
Financials
 Over £4m worth of investments approved.
 Provides loans of £20k - £250k.
 Work closely with support providers to
provide wrap around support.
 Loans up to 25 years, repayment holidays.
 Flat 6% fixed interest on loans.
 No additional fees or penalties.
 Repayments to date c £1.5m.