At the recent Association of Charitable Foundations conference, representatives of three smaller foundations shared their experiences and perspectives of making social investments and providing non-financial support to organisations.
In the context of turbulent times, the theme of the conference focused on how organisations are faced with growing funding uncertainty. Can social investment bring about more stability and sustainability for organisations in our sector?
Jan Doole from the Tuixen Foundation, explained how in 2011 the foundation became aware of buzz about social investment.
“The Tuixen endowment was sitting there not earning very much interest and not doing any social good either.”
Tuixen considered social investment for four reasons:
- Current financial returns from mainstream investments were low
- Support charities and achieve our charitable purpose
- Lack of capital investment hampering charities to develop new income generating services (especially important due to reduction in funding, cuts). Hamster wheel of one-off funding
- More investment opportunities were becoming available, track record emerging, risks becoming clearer
Working with Triodos, Tuixen invested in Golden Lane Housing and the Together Group, which creates full-time jobs for ex-offenders by employing them to renovate empty properties and build and new homes.
The Tuixen approach is:
- Invest in organisations that they would consider giving a grant to
- Discuss why to invest rather than give a grant
- No investing more than 10% capital required
- Learn wherever possible
“As a small foundation with very limited resources we can’t offer a lot more than finance in terms of expertise, but we can offer openness, honesty, a listening ear and patience. We can also put charities in touch with organisations who can help, or other charities doing similar things.”
Jessica Tyrell from Bank Workers Charity explained how they set aside £1m for social investment in 2013. By April 2017, BWC had four investments totalling £723k. For example, they invested directly in a start-up which creates medical apps for mental health issues, complementing their other activities in the mental health area. BWC have also been able to provide non-financial support, offering mentoring and coaching, support to tailor the app to the needs of the banking industry, and providing introductions to help grow the business.
Barnaby Wiener, Founder and Trustee of Treebeard Trust thought it would be a challenge to identify attractive social investment opportunities, but in fact the problem has been the opposite: managing the deal flow. The Trust started making social investments in 2015, and there are now 20 different investments. The equity investments are generally in early-stage for-profit impact businesses. Additionally, the Trust provides debt investments and debt funding to charities and social enterprises.
“The realisation that it is possible to make money and simultaneously do good has been hugely exciting.”
To get started, the Foundations recommended:
- Attend the ACF Introduction to Social Investment for Foundations
- Sign up to Get Informed to receive information and support on how board members can engage with social investment:
- Join the Social Impact Investors Group (SIIG) a group providing help, guidance, ideas and some practical tools and information on social investment opportunities.
- Introductory reading:
The End of Charity by James Perry
Invest in Social Change TED talk Toby Eccles
Research Briefing – Charitable Trusts and Foundations’ engagement in the social investment market
Learnings – overcoming the barriers faced by foundations including:
- Perception of lack of investment opportunities related to an organisation’s mission - there are many different types of social investment and it is still developing.
- Trustees or board members can be risk and/or change-averse - financial return does not have to be sacrificed by social impact.
- Reluctance to go it alone - set up a network of people you can talk to/get advice from. Join the Social Impact Investors Group. Work with other foundations to share due diligence etc. Rely on structured deals and intermediaries.
- Lack of skills/time/resource/fear of 'failure' - you don’t have to be an expert. Be open and honest about what you can do but don't be put off by others doing a lot more.
- Impact measurement sounds tricky - Measurement of social impact should be appropriate to what the organisation can deliver and that which the Trust or Foundation really needs