For most charities, the question of how best to use limited funds has become constant balancing act as their investment in their activities becomes more restrictive.
Trustees and senior leaders have to decide whether to prioritise meeting today’s urgent demands or to invest in assets and strategies that strengthen the charity’s sustainability in the long term.
A recent report by the Department for Culture, Media and Sport (DCMS) and the Behavioural Insights Team (BIT) sheds light on this dilemma, within many organisations.
Their research explored how charities and other not-for-profit organisations approach investment and the behavioural barriers that can prevent them from thinking beyond their immediate needs.
According to the study, many not-for-profits see investment as being at odds with their charitable purpose.
Leaders often feel that every available pound should go directly to beneficiaries, making it difficult to justify spending on initiatives that don’t produce instant results.
This short-term mindset, while understandable, can hinder long-term resilience. The report identified that charities frequently operate reactively, investing only when problems arise, rather than proactively planning for the future.
Limited time, financial uncertainty and a fear of risk all contribute to this pattern, even amongst some of the UK’s largest organisations.
Investment doesn’t always mean stocks and shares, although these remain popular options for many funds.
Looking more broadly, it might involve upgrading digital systems, developing staff skills, improving property or building reserves, all of which contribute to the organisations cost efficiency and delivery of support to beneficiaries.
Over time, investment in these areas can help to build better resilience that reduce long term costs.
By viewing investment as a means of achieving greater impact rather than as a diversion of funds, trustees can reframe their thinking from “spending less on services” to “spending smarter for sustainability.”
The DCMS research highlighted several behavioural factors that hold charities back from investing strategically:
Overcoming these challenges often requires both cultural and practical change. Trustees and senior managers can start by:
The DCMS report recommends that charities look to share good practice and learn from examples of responsible investment that enhance, rather than conflict with, their charitable aims.
A balanced strategy does not mean diverting core funds away from urgent needs. Rather, it’s about identifying opportunities where strategic investment can reduce long-term costs, increase efficiency and unlock new sources of income.
Our experienced charity and not for profit team are happy to help organisations and trustees with a wide range of issues.
Please get in touch with our Charity Partners Hazra Patel (hazrapatel@lubbockfine.co.uk) and Lee Facey (leefacey@lubbockfine.co.uk) if you want to discuss any of these matters covered in the blog above.
