Why Charities Struggle to Invest

…and what to do about it

Despite growing interest in using capital more strategically, many charities remain hesitant when it comes to impact investment. They’ve heard the term, maybe even had internal conversations, but something stalls.  

The idea is appealing – invest in a way that furthers your mission while strengthening long-term financial resilience – but when it comes to action, most organisations pull back. 

And they’re not wrong to pause. Investing as a charity comes with complexity. The sector’s instinct is caution. But that caution, left unchecked, can become inertia. 

So, if your organisation is curious but static, asking questions but avoiding decisions, you’re not behind – you’re right where most charities are.  

What gets in the way

The key is understanding what’s getting in the way, and what to do next.

1. Risk aversion: when protection becomes paralysis

For many trustees, the primary instinct is to preserve capital, not deploy it. That’s what they’ve been appointed to do – protect the organisation from undue risk. But in a volatile funding environment, where grants are scarce and core income is shrinking, holding capital indefinitely isn’t always the responsible option either. 

The fear of making a misstep – reputationally, legally or financially – keeps many boards stuck in defensive mode. They know the status quo isn’t sustainable, but they’re not yet confident that change is safe. 

The result? Caution becomes paralysis. Opportunities are delayed. Innovation is missed.

2. Governance complexity: good intentions, unclear routes

In many organisations, investment decisions don’t sit neatly within one person’s remit. They require board sign-off, legal scrutiny, and usually several rounds of discussion across committees. It’s not always clear who owns the conversation. 

That’s before you get to questions of delegation, ethical policy alignment, or whether the investment committee is even the right forum for early-stage impact opportunities. 

In the absence of clarity, things drift. Papers are postponed. And what started as a promising conversation becomes another item lost to governance backlog.

3. Internal capacity and confidence

Most charities – especially in health and care – don’t have teams of in-house investment professionals. The day job is already full: delivering services, managing operations, responding to funding pressures. 

The idea of scoping the market, assessing risk, and evaluating terms sheets? It often feels like too much. Not because it’s impossible – but because no one has the time or the mandate to lead it through. 

In practice, we see a lot of half-conversations: good ideas floated, enthusiasm in principle, then nothing concrete. Not because the appetite isn’t there, but because the capacity isn’t.

4. Misunderstanding what impact investment really is

Many boards still conflate impact investment with social enterprise, ESG portfolios, or mission-related grants. Some fear it’s a risky financial gamble dressed in feel-good language. Others think it’s only for endowed foundations or organisations with millions in reserves. 

The truth is that impact investment is simply the intentional use of capital – aiming for both a financial return and a meaningful, measurable social benefit. It is not a donation. It is not a handout. But it is a form of capital that works differently – and in many cases, more purposefully – than traditional investments. 

Done well, it can strengthen your financial model. But it is not about chasing profit, and it is certainly not one-size-fits-all.

5. No credible starting point

Most charity leaders we speak to say the same thing: “We’re interested, but we don’t know where to begin.” They have read a few articles, heard some sector buzz, seen a webinar. But when it comes to acting, they’re unsure what a first step even looks like. 

That’s not a failing. It’s the result of a market that often speaks the wrong language – where most guidance is aimed at fund managers or private investors, not mission-led organisations with public obligations. 

There’s a knowledge gap, yes. But more than that, there’s a translation gap – a need for frameworks, tools and advice written for the charitable context. 

What’s at risk if nothing changes? 

The risk isn’t just lost opportunity. It’s the slow erosion of financial resilience. 

In health and care, where needs are rising and funding is under pressure, capital has a role to play. There are innovations out there – in diagnostics, care models, mental health, prevention – that align directly with charity missions. But many of these ventures need early-stage investment, and without it, they stall. 

At the same time, charities are sitting on capital, often held in reserves that aren’t generating meaningful impact or long-term return. 

We’re not suggesting reckless redeployment. But we are asking: what is that capital for? If not to protect and advance your mission, then what? 

What can charities do instead? 

Here’s what we recommend, based on what we’ve seen work in practice. 

• Start with shared understanding  – Don’t jump to investment decisions. Start with structured internal discussions. Use plain language. Define what impact investment means in your context. Acknowledge the concerns – about risk, responsibility, and mission drift – and talk them through. 
• Ask the right question – Move from “Can we invest?” to “How can we use our capital to support our mission more actively?” That small shift reframes the conversation from risk to opportunity – and opens the door to creative thinking.
• Focus on alignment, not speed  – There’s no rush to act. But there is value in preparing. That might mean building internal awareness, reviewing reserves policy, running a workshop with trustees, or exploring case studies from others who’ve gone ahead. 

You don’t have to commit capital today. But you should be asking what role your capital could play tomorrow. 

Work with people who understand both sides 

Many advisors understand investment. Fewer understand the realities of charity governance. Fewer still understand health and care charities. That matters. 

When the risks are reputational as well as financial, and when your board is looking for assurance as well as returns, you need advisors who speak your language – and who can help you make decisions with clarity, confidence and credibility. 

Consider this… 

Impact investment is not a silver bullet. It does not guarantee returns. It does not replace fundraising or grant income. 

But it can be a serious tool, one that allows charities to use their capital with intention, to back the change they want to see, and to strengthen their financial foundation over time. 

If your organisation is beginning to ask questions about how to invest with impact, that’s a good sign. It means you’re ready to move beyond preservation and into purpose. 

And if you’re not sure where to begin? That’s also fine. 

At FCC, we’ve been through the journey ourselves. We understand the blockers, the questions, the complexity. And we’re here to help charities make good decisions, at the right time, in the right way. 

The first step is a conversation. 

giovanna@futurecarecapital.org.uk