Hot on the heels of the Arts Impact Fund, Nesta’s Arts &Culture Finance team is today launching an innovative, new social impact investment fund for arts, culture and creative industries - the Cultural Impact Development Fund (CIDF). Over a three-year period, this £3.7m fund will offer affordable, unsecured finance on flexible terms to England’s arts, culture and creative organisations bringing about positive social change in their communities. Supported by the Growth Fund programme through Access - the Foundation for Social Investment and with grants from Big Lottery Fund and a loan from Big Society Capital, this fund will help borrowers innovate, become more financially resilient and more adept at monitoring, evaluating and communicating their social impact.

Going beyond simply providing finance, CIDF has a dedicated Impact Manager (Melissa Wong) who will work with applicants to develop the evidence base, a theory of change and a framework for monitoring & evaluation (M&E) for their socially impactful activities. It’s our response to what we’ve learned from the Arts Impact Fund - that arts and cultural organisations often lack the capacity to carve out time to refine this increasingly crucial aspect of their work. In addition to these impact fundamentals, we will collaboratively set goals around outputs, outcomes and M&E improvements that will support organisations in achieving over the lifetime of their investment - thereby fostering a more specific and long-term approach to impact.

We’ll also be taking this somewhat further by experimenting with setting financial incentives around the attainment of impact targets. Borrowers with a repayment period of two years or greater will be subject to an annual review of their impact goals, which could result in reductions to their interest rate, the magnitude of which will be dependent on the extent to which they’ve been successful. We’re well aware of the challenges around this - not least in terms of picking suitable, measurable goals and the ethical questions some may have around financially incentivising social impact - so we’re keen to learn about how this will work in practice.

Impact, simply put, is a marked effect or influence on someone or something. A fairly vague definition for a term that has propelled a movement towards evidence-based financing and data-driven decision making. If you are a charity provider or involved with a mission-driven organisation, chances are you have been approached by a funder, investor or government entity and asked to articulate your value proposition and demonstrate how your services impact your community - increasingly so as government support for historically well subsidised sectors are experiencing shifts in funding priorities.

While arts and cultural organisations are often at the heart of social movements, acting as a channel for innovative exchange of ideas, many professionals in the sector have a difficult time demonstrating that value to funders and policy-makers in a language that is understood and accepted by both sides. Monitoring and evaluating organisational impact can push even the most seasoned professionals out of their comfort zone. And yet this task is an important one because it allows us to make an informed case for not only funding, but for the imagination of the public too.

“What the heart knows today the head will understand tomorrow”, said the Irish poet James Stephens. Deep down, we all know about the magic of great art, culture and creative endeavour. The evidence-based approach we’re talking about attempts to make sense of that, in a small way and however imperfectly. It is not reductionist and can only be complementary, enhancing. And we’re excited to grow our understanding of that and share our lessons as widely as possible.

With our expanding work in social impact investment in arts and culture, we have also launched a new portal to help arts and cultural organisations looking for finance. Arts & Culture Finance will provide information and updates about the new Cultural Impact Development Fund and the Arts Impact Fund as well as case studies, resources and more to help social impact investment get better traction in the sector. Visit www.artsculturefinance.org or follow us on Twitter @artsculturefin.