Driving racial equity in social investment

Systemic racism leads to less funding

Black and ethnic minoritised-led social enterprises, social investment intermediaries, and fund managers, are statistically less likely to receive social investment.

Most black and ethnic minoritised-led voluntary, community and social enterprises (VCSEs) are small (with a turnover of less than £500,000). They exist in a wider context where 90% of all funding available goes to the country’s biggest charities (turning over £500,000, or more) and where many must plug the funding gap themselves. 60% of the financing for the UK’s black and ethnic minoritised-led VCSEs comes from the personal savings and the employment income of their directors, whereas only 20% derives from grants.

These organisations are impacted by a lack of intermediary support and have less access to inclusive funding products. As a result, black and ethnic minoritised-led social enterprises tend to be smaller and less resilient. Very few investment funds (representing less than 1% of UK financial assets) are managed by people from black and ethnic minoritised communities, which also compounds the lack of funding flowing to black and ethnic minoritised-led organisations.

Pathway Fund improving access to investment

Pathway Fund exists to revolutionise philanthropy and social investment. It is the UK's social investment wholesaler dedicated to catalysing opportunities for black and ethnic minoritised communities. Pathway invests into charities and social enterprises through fund managers and social investment intermediaries. It does this through a mixture of financial and non-financial support including grants, repayable funding, technical support, and assistance with organisations’ capacity building.

Social investment to build financial resilience

Alongside a larger tranche of grant funding from JRF, JRF's repayable social investment has supported two pilots: the First-time Fund Manager Incubator and the Enterprise Development Programme.

The programmes provide grants, repayable funding, tailored advice, and training to 3 fund management teams and 12 social enterprises. The programmes focus on building the participating organisations’ financial resilience and investment readiness with the aim of raising capital over a 12–18 month period.

JRF’s investment: £120,000 repayable grant completed in 2023.

Dilys Winterkorn, Project Director at Pathway Fund said:

“Social investment is an important mechanism in the arsenal of tools available to funders. Black and ethnic minoritised-led organisations are interested in social investment – but their growth is stunted by lack of financial support, expertise and trust. JRF’s funding and expertise has supported Pathway in developing programmes and products that will revolutionise black and ethnic minoritised-led VCSEs, and the communities they support.”

Discover more about social investment at JRF.