The City Bridge Trust share their journey exploring social investment in addition to their grant-making activity.
Compared to some of the foundations we work with, City Bridge Trust is a young social investor, with a fund dating back to 2012. We have a lot of grant-making experience, but we started exploring social finance for three main reasons: 1) we wanted to use more of our resources in support of civil society; 2) we wanted to play our part in helping develop London as global hub for social investment; and 3) we wanted to help mitigate the growing pressure on charity budgets as local and central government funding to the sector shrank.
From the outset, our board set us the challenge of demonstrating the value of our approach. Their argument was that the social investment market could only grow if it was credible, and it would only be credible if investors were clear about the social and financial returns they might receive from the risk they were being asked to take with their capital.
As we approach the fifth anniversary of our fund with over £12m committed, there are several lessons learned. The first is the need for patience to build a balanced portfolio with a mix of holdings for different types of investees. When we started, we deliberately sought larger investments and asset-backed opportunities that would give us a solid bedrock – stability here would allow us to take more risk with pilot projects and patient finance. The second lesson is the need for appropriate levels of engagement – investments don’t always go as hoped and, when they don’t, we need to collaborate with management teams and boards to varying degrees to try and get things back on track. In one case we decided on an early exit, but only after all other options were exhausted. The third lesson has been the need for us to play our part in helping build the market.
Early on, we recognised that if a broader range of charities and social enterprises were to take advantage of social finance opportunities, then they would need support to overcome some of the more challenging barriers to market entry. Our Stepping Stones Fund, grant-making programme run in partnership with UBS, began life in 2015. Since then we’ve supported 49 organisations with £2.2m to develop new business models, create new services, generate a deeper understanding of their cost base, and strengthen internal systems of quality assurance, impact assessment and management control. This work has ranged from building supply chains for organic produce in North London, to developing a bakery with a homelessness charity, to catalysing a major social investment fund for work improving outcomes for young people in West London.
Many of these grants support activities are still underway, but already we are seeing positive outcomes with charities reporting that the funding has helped strengthen their operations and helped them plan for repayable finance.
Social investment won’t be everyone, but for those who have an idea they want to explore further, Stepping Stones is designed to be a safe space in which organisations can develop more detailed plans. We are perfectly happy if grantees conclude that this is not the right time – better that than a balance sheet liability that affects other services.
Over the coming months City Bridge Trust will publish its strategic priorities for 2018-23. We will be looking for closer alignment between our grant-funding and social investment activities. In Spring 2017, we’ll be announcing the fourth round of Stepping Stones at UBS, and over the course of this year, we’ll see more of our current grantees conclude their projects. We’ll also be launching a new portfolio approach to our Social Investment Fund and offering a more diverse menu to organisations who are seeking finance. It has been an exciting five years, and we are looking forward to supporting even more social enterprises with their plans over the next five.
Find out more about how trusts, foundations and charities with investable assets can make social investments via the GET INFORMED campaign.