The powerful role of foundations in social impact investment | Big Society Capital

You are here

The powerful role of foundations in social impact investment

Region | 

On 25th May, we hosted an event on impact investing for foundations at law firm Bates Wells Braithwates, hosted in conjunction with BWB, Toniic and the Social Impact Investing Group.

Attendees said: “It was a really inspiring event and great to hear from both the investors and the investees – those different perspectives really bring the idea of impact investment to life.”

Representatives from eight UK and international foundations (Treebeard Trust, Friends Provident Foundation, BMW Foundation, Joseph Rowntree Foundation, Access Foundation, Panahpur, Andrews Charitable Trust and the Ford Foundation) explained their journeys of engagement into social impact investment and the different roles they are playing: from making direct investments into high impact enterprises, to committing to 100% impact in their investment portfolio.

"We stopped defining our impact by our marginal spend as a grant-maker and now call ourselves a capitalised charity, judged by the use of our capital". Danielle Walker Palmour, Friends Provident Foundation

“Having authenticity in this market is important. Foundations have a deep understanding of social impact and they need to bring that to bear.”  James Perry, Panahpur

Our Chair, Sir Harvey McGrath, gave a keynote speech about philanthropy and how it is not all about grant making. Foundations, amongst others, have been creative in their approach, providing blended finance and providing more risk in a capital structure. The role of grant funding in the early stage of a charity or social enterprise is important and foundations have a crucial role to play. We need a lot more venture philanthropy where an informed funder is providing not just capital but a lot of non-financial support to provide a pipeline of interventions that are fundable by the wider market. According to the Global Sustainable Investment Alliance’s 2016 review – there are now $22.89 trillion of assets being professionally managed under responsible investment strategies, (defined here as negative screening, ESG positive screening and impact investing), an increase of 25 percent since 2014. This constitutes one quarter of all managed assets globally. 29% of managed assets in the UK are managed under responsible investment strategies. There is a clear trend globally of a journey from traditional investing towards  more impactful and value aligned investment – a progressive shift of funds to more intentionality. This is because of the growing awareness of the social and environmental challenges we face, and generational change.

Foundations have a critical role to play as they have:

  • Huge assets
  • Independence
  • Convening power
  • Deep understanding of social issues and of social impact
  • The ability to provide capacity building support (financial and non-financial)
  • The ability to combine grant and loan
  • The ability to provide patient capital
  • Foundations also have a key role in protecting against impact dilution and to remain very clear about the social and environmental mission

Last but not least, three high impact enterprises (Aduna, Auticon, Fair Finance), who have received investments from some of the foundations in the room, explained how they are changing people’s lives and how impact investment has been crucial to them:

“We only want to accept capital from mission aligned investors – in our industry there is a lot of investment but it’s not necessarily mission aligned – this is crucial to maintain the long term integrity of our mission. These impact investors will go to places and take risks that other investors normally won’t –one of our investors has given us a loan when institutional investors thought it was too early stage.” Andrew Hunt, Aduna

To join the Social Impact Investors Group (SIIG) or access its website, please click here.

To subscribe to our GET INFORMED campaign, please click here. Charities with investments e.g. trusts, foundations, and operational charities can get involved in social investment in different ways depending on their mission, size and where in the ecosystem they feel they are best placed to play a role.  

Last updated | 
2 June 2017