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Impact Investing

Letter from London

A report on social innovation from England’s capital.

As a recent transplant to London (from Ontario via Boston) and one of the first employees of Volans, a consultancy working at the intersection of the sustainability, entrepreneurship, and innovation movements, I’ve been asked by the editors of SSIR to write an occasional “letter” about activity here in the English capital.

My hope is to provide SSIR readers with a glimpse of some of the conversations, events, and ideas in what British Prime Minister Benjamin Disraeli affectionately called “modern Babylon.” London is a city that epitomizes FOMO—Fear Of Missing Out—something hard to avoid when there are so many things going on at the same time. It provides a particular challenge to my colleagues and me at Volans, where our mission is to engage with innovation networks and assess how the different puzzle pieces are fitting together.

The third week in June, there was the usual full plate of events: celebrations such as the Ogunte Women Social Leadership Awards; corporate announcements such as Marks and Spencer’s Stakeholders meeting, where attendees reviewed the company’s Plan A Strategy (and the launch of the world’s most sustainable suit); and a regular Impact Investment Breakfast.

The Impact Investor Breakfast includes a growing network of social finance professionals based in London. It was started in 2008 by Audrey Selian (Rianta Capital), Jessica Shortall (Catalyst), and Alison Rodwell (Shell Foundation), and is now carried forward by Selian, Kelly Clark (Marmanie), and Natalie Pinon (Marmanie) to enable a monthly gathering where professionals can share what they are working on and have candid discussions about developing trends in impact investment.

The format is straightforward. Members propose a topic, the topic is marketed to the group, and at the breakfast itself, there is a rapid fire round of introductions followed by a brief presentation on the topic by a handful of preselected members and then group discussion. The content of these sessions is always rich—but equally important is the network development for people who might otherwise work in isolation. The group is deep and wide: There are nearly 300 members representing a cross-section of investors, donors, and foundations, as well as representatives from consultancies, intermediaries, and asset managers—at least 40 or 50 people attend each event.

The discussion topic for the 41st meeting was Charities & Social Investment, with a focus on providing an overview of how charities are looking at more innovative ways to finance their activities—a particularly relevant theme in the context of public funding cuts and pressure on donations. 

The presentation kicked off with Iona Joy from New Philanthropy Capital, who gave a quick overview of the state of impact investment in the UK today. In summary: Total social investment in the UK in 2010/2011 was £165 million (per a 2011 study by BCG and The Young Foundation). Big Society Capital will boost the supply side of the impact investment equation, but there is ongoing angst around the demand. (Where are all the investible deals?) Impact bonds are an interesting innovation, but still in their infancy. And in the charity sector in particular, there are huge problems in the changing commissioning environment, creating even more uncertainty around capital flow. This means consortia work is more important than ever. But if charities are to bid together on contracts, there is a massive need for new forms of coordination among organizations.

This was a perfect segue into the next presentation by Phil Caroe from Allia and Henrietta Podd from Canaccord Genuity, who are partnering to develop a retail charity bond program that enables charities to raise medium-term debt finance through the retail bond market.

What followed was an interesting discussion on the Scope Bond, with input from Investing for Good’s Gabi Blumberg. Scope is a UK organization focused on working with disabled people, and one of the first charities to enter the capital markets with the launch of its £20 million social investment bond program in 2011. On May 31, it closed the first tranche (£2 million at 2 percent per annum for three years) with interest from a range of investors who were attracted to both the financial as well as the social returns. The bond is listed on the Luxembourg Stock Exchange. Watch this space: As the rest of the rounds fill up, the Scope Bond will be an important model for charities to emulate.

Rounding out the presentation was an overview from Paul Cheng on Shared Impact. This is a new UK business (full disclosure: I am a trustee) focused on building a refinancing platform using philanthropic funds to provide charities and social enterprises with affordable loans deployed. Imagine Kiva meets Just Giving. Stay tuned for more on this model.

The point that jumped out at me during the discussion was succinctly made by Martin Rich, sales director at Social Finance Ltd. He argued that when we talk about impact investing, as a sector we default to an explanation of tradeoffs (social impact for financial value). But this is the wrong message to send to mainstream investors. It confuses them. In the mainstream markets, decisions to “trade off” return for risk are already part of the system. Impact investment is no different; there is simply a defined risk/return pay off for a given asset financing of a given enterprise serving a particular sector of society. This gave those in the room pause for thought.

Many ingredients in creating a movement, but the importance of building the network that will keep this moment alive is key. Does your city have a regular network meet up like the Impact Investment Breakfast? Does it need one?

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COMMENTS

  • BY Bonnie Foley-Wong

    ON July 10, 2012 11:25 PM

    Hi Charmian,

    Great to see this letter from London.  I’m a recent transplant to Vancouver (from Toronto via London) and I look forward to our paths crossing when I next visit London.  The social finance/impact investment community in Vancouver is certainly an active one and worthy of a separate blog post. 

    A new thing I would like to mention are the monthly events I have been hosting.  My new venture, Pique Ventures, is taking shape as an investor network - built on principles of relationship-building, being part of the investment ecosystem, and most importantly on integrated investment decision-making using emotion and intuition alongside analysis.  This summer, Pique Ventures has been hosting conversations, open to all, around “investing with our values”.  Each event has a theme (the first one was risk, the second was impact, this month’s is financial returns, and August will be about crowdfunding) and the intention is to open up the dialogue and share perspectives around the underlying things that enable or prevent us from investing in things we are passionate about or that we believe would positively impact the world.  The aim is to start to move away from old paradigms and help shift the mindset to what we really want investing to achieve.

    I’d love to hear more about events in London, share knowledge, and continue the conversation.

    All the best,
    Bonnie

  • Ashley's avatar

    BY Ashley

    ON July 12, 2012 03:24 AM

    HI - and from Big Society Network @thebigsociety. we are running the Nexters social tech entrepreneurs program- nexters.co.uk might be of interest - shall we meet?
    Ashley

  • BY Charmian

    ON July 12, 2012 03:28 AM

    Thanks for your comment, Bonnie.

    I agree - there are some amazing things happening in Canada in impact investing - and really great to hear that Pique Ventures is hosting these kind of monthly events.  I’m sure it is already on your radar, but Volans was part of the early phases of the Task Force for Social FInance in Canada - check out the report Mobilizing Private Capital for Public Good.

    http://socialfinance.ca/uploads/documents/FinalReport_MobilizingPrivateCapitalforPublicGood_30Nov10.pdf

    Thanks again for your comment - and please share how things develop with your own network building activities.

    Best
    Charmian


  • BY Charmian

    ON July 12, 2012 03:33 AM

    Hi Ashley

    I’d love to meet - we’ve been following your work over the last few months and it looks terrific. Why don’t you send me a note via twitter (@volanschar) or email .(JavaScript must be enabled to view this email address) and we can set something up.

    Charmian

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