Some charities will always rely on grants rather than access social investment to fund their work, according to a report by Social Investment Business and think tank New Philanthropy Capital.

Their research into civil society financing found there needs to be a distinction “between organisations that can take on” social investment and “those that can’t".

They warn that due to the legal structures of some charities and social enterprises “repayable finance will not be an appropriate tool for all of them”.

“For some organisations, grants can be seen as an early stage on the journey towards investment. While for others, it is the right and permanent form of funding,” they add.

The examples of “a foodbank, peer-support service or community organisation that may create enormous social value without ever generating the trading surplus needed to repay a loan” are given.

It warns that treating such organisations as “simply not yet investment ready risks designing the wrong support around them”.

Report author David Neaum said: “The impact economy needs clearer language if we want better decisions about policy, funding, finance and infrastructure.

“This framework is about matching different types of support to different organisational realities.”

Ministers are being urged to act on the report’s findings through the work of its Office for Impact Economy, which sits in the Department for Culture, Media and Sport and looks at ways to improve philanthropy and civil society income.

Mayors and strategic authorities are also asked to take note given their “greater responsibility for growth and investment”.

“We’re seeing pockets of really promising collaboration, including with the Department for Education,” said researchers.

“ Embedding this understanding across central government, mayors and strategic authorities could enable a more consistent approach to partnership with the impact economy, delivering place-based impact at pace and scale rather than designing from first principles each time.

“This report is the start of a conversation: offered to the sector and policymakers to test and explore.”

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