New funding landscape for the arts

Impact investing is a type of investment that aims to achieve both a financial and a social return. It’s a way of funding projects where success isn’t just measured by your income statement, cashflow and balance sheet, but by the positive impact the work makes. And it’s well-suited to the arts.

We know the creative industries are a global success story, representing 3.1% of global GDP. We believe in the transformative power of arts and culture, and we know it plays a vital social role too. But there have been significant challenges in the cultural sector, particularly around funding.

In 2014, Nesta released a report – The New Art of Finance – which examined some of these challenges. Looking at potential solutions, it recommended the creation of an arts impact fund and public-facing R&D programmes for structured experimentation and shared learning.

The landscape in 2014 was tricky enough even without the events of the following decade. Those challenges not only persisted but worsened with the combined pressures of the pandemic, rising living costs, reduced grant funding, and changing audience behaviour.

Capital seeking impact

At the same time, there were changes in the broader investing landscape, with a significant evolution in the interest and understanding of social impact investment. In 2015, a coalition of arts funders launched the first Arts Impact Fund, managed by Nesta, which developed into Arts & Culture Finance (ACF).

ACF comprises three funds for eight investors, including the current Arts & Culture Impact Fund, which is one of the world’s biggest impact investment funds for organisations in the cultural, creative and heritage sectors. At Arts & Culture Finance, we know there is capital out there seeking positive social impact. The cultural and creative sector – including the arts – is a natural home for this capital.

And so, nearly ten years later, we are delighted to have been commissioned by the Creative PEC to write a new report:  Impact Investing in the Cultural and Creative Sectors.* It was produced by me and my colleague, Seva Phillips, in collaboration with David Maggs, Metcalf Foundation’s Fellow on Arts and Society, based in Toronto. The report shows the potential for impact investment to be a transformative tool for the cultural and creative sectors, whose core activities are characterised by risk-taking, experimentation and imagination.

The report demonstrates how impact investing is making a difference worldwide, bringing together interesting examples from across the globe, and explores the steps local economies can take to create the conditions for successful impact investment.

Investors have an appetite for experimentation

There is a growing global movement of investing for impact, alongside an urgent need to find new funding models for the cultural and creative sectors globally. These intersecting priorities present an opportunity for real change in the arts funding landscape. We’re excited to see more people getting interested in this connection.

In recent years, prominent impact investment events and gatherings have included dedicated sessions on arts, culture, and creativity. Simultaneously, cultural and creative sector events are now incorporating sessions on impact investment. The impact investment market is growing and investors’ appetite for experimentation and risk-taking is growing too. Crucially, we think the growing market itself will contribute to the social impact arts organisations can make.

This report aims to keep this momentum going by helping to convene national and global interest groups and communities where a diverse group of stakeholders can participate. We’ll be launching the report with a series of seminars, in which expert panellists will explore how the future funding landscape could be motivated by social impact as well as just investment. These discussions are just the beginning of what we hope will be a solid foundation for new collaborations between impact investment and the cultural and creative sectors, bringing benefits to all those involved.

Join the conversation

We’re proud of what social impact investment in the arts has achieved so far and excited about future possibilities. We hope the report will be essential reading for policymakers, those in leadership roles in the arts and anyone keen to see what a next generation of arts funding could look like. You can find out about the report launch events here.

Fran Sanderson is Director, Arts & Culture Investments and Programmes at Nesta.
 artsculturefinance.org
@artsculturefin | @Nesta_uk

* Impact Investing in the Cultural and Creative Sectors was commissioned by the Creative Industries Policy and Evidence Centre (Creative PEC), funded by Arts and Humanities Research Council. 

This article, sponsored and contributed by Arts & Culture Finance, is one of series demonstrating the impact repayable finance can make to the arts, culture and heritage sector.