ukti social investment trade mission brochure

Social Investment

Trade Mission 14th - 18th October 2012

Cover photograph by Andrew Carr.

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enterprise.

I wish you all a useful, interesting and inspiring few days.

Nick Hurd MPMinister for Civil Society

The US and UK are currently at the forefront of social investment and innovation: developing new institutions, products and infrastructure to help social organisations tackle society’s most intractable problems.

By learning from each others’ experience and harnessing the expertise of both countries, we can build on the progress made over the last decade and contribute to the huge growth potential of this market over the next few years.

I hope this trade mission helps to enhance both the US and UK’s reputation as global leaders in social investment and innovation; open up a dialogue between US and UK policymakers, investors and entrepreneurs to discuss barriers and opportunities to developing the global social investment marketplace; and foster deal making between the two countries’ policymakers, investors and entrepreneurs.

Our objective in the UK is to grow the social investment market and make it easier for social ventures and entrepreneurs to access capital. In particular, we are:

Increasing the supply of finance for social investment, through Big Society Capital, the first social investment institution of its kind. Funded by dormant bank accounts and equity investment from Britain’s four largest banks, BSC will have approximately £600 million of capital.

Increasing the number of credible social investment opportunities. We have recently launched an Investment Readiness Programme, which consists of two £10m funds (the Social Incubator Fund and the Investment and Contract Readiness Fund) to help create a strong pipeline of social ventures that are equipped to secure new forms of investment or compete for public service contracts.

Creating more and better Social Impact Bonds: We have worked with four local authorities to design Social Impact Bonds targeting troubled families. We are using insights from these and other SIBs to establish a Social Impact Bond Centre of Excellence to support the development of more SIBs across the public sector. This will increase opportunities for social ventures to deliver payment by results contracts and create more viable social investment opportunities.

Removing barriers to social investment: We have worked with impact measurement experts, investors and social sector leaders to drive the use of high quality impact measurement in the UK social sector over the next decade. We are also reviewing the legal, regulatory and financial barriers to social investment to ensure a fair and consistent playing field for social

Foreword

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UKTI is the Government organisation that helps UK based companies succeed in the global economy.

UKTI also helps overseas companies to bring their high quality investment to the UK market, ranked as Europe’s number one location to set up an international business presence. UKTI provides expertise and contacts through an extensive network of specialists in the UK, British embassies, and other diplomatic offices around the world.

Social/Impact investments aim to solve social or environmental challenges while generating financial profit. Impact investing includes investments that range from  producing a return of principal capital (capital preservation) to offering market-rate or even market-beating financial returns. Although impact investing  could be categorized as a type of “socially responsible investing,” it contrasts with negative screening, which focuses primarily on avoiding investments in  “bad” or “harmful” companies - impact investors actively seek to place capital in businesses and funds that can harness the positive power of enterprise.

— The Global Impact Investing Network

A chorus of prominent voices is calling for business to play a proactive role in addressing social and environmental challenges at scale: Bill Gates calls for ‘creative capitalism’, Tom Friedman calls for a ‘green economy’, Al Gore and David Blood call for the ‘sustainable corporation’, and Muhammad Yunus calls for ‘social business’.

The sustainable capitalism called for by these thought leaders already exists in a fragmented form today. However, a fragmented market is not capable of growing the number and scale of companies, nor can it attract significant

Visit www.ukti.gov.uk or call + 44 (0)20 215 8000.You can also catch up with us on these social media channels:• UKTI on Twitter at @UKTI• UKTI on YouTube at youtube.com/UKTIweb• UKTI’s Blog at blog.ukti.gov.uk

For more information on UKTI in the United States please contact Spencer Mahony at spencer.mahony@fco.gov.uk and he will be happy to:• Answer your questions about UKTI.• Offer advice on doing business overseas.

About UK

Trade and

Investment

(UKTI)

What is

Social/

Impact

Investing?

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institutional capital. This requires defining an “impact investing” asset class and accelerating the emergence of new capital markets that  support appropriate investment vehicles.

Since the 1980s the concept of socially responsible investing has taken off exponentially. SRI assets in the US rose more than 324% from $639 billion in 1995 to $2.71 trillion in 2007. The vast majority of these assets are invested in negatively screened public equities funds, allocation of capital toward companies in a given industry that have lower ESG risk, or the use of shareholder activism.

Investors are increasingly seeking impact investing opportunities or investments that generate a financial return while solving social and environmental problems. The Monitor Institute’s recent report on “Investing for Social & Environmental Impact” estimates that Impact Investing has the potential to grow to about 1% of total managed assets, which would result in about $500bn of capital channelled toward social and environmental impact.

The potential for the growth of social investment goes beyond UK borders. The social investment market operates within a globalised economy. There is significant momentum in the social sector and high levels of interest from government and mainstream financial institutions which offers the UK the potential to become a global hub for social investment, servicing social organisations, with resultant high value and high skilled job creation.

The UK has both a leading financial centre and a flourishing social sector, which means that is well placed to emerge as a global hub for social investment. We already have a strong set of expertise, we are rapidly developing global infrastructure and are at the forefront of developing cutting edge products:

ExpertiseThe UK has the right expertise, which is growing: legal; accountancy; banking and now a cluster of social investment financial intermediaries, which have been further boosted by £600 million Big Society Capital (launched April 2012).

Infrastructure The UK is driving new market infrastructure for the social investment market, such as the Social Stock Exchange (launching in London in 2013) and has recently launched an ambitious programme, Inspiring Impact, which is looking to make impact measurement more coherent and consistent.

Social/

Impact

Investment

in the UK

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ProductsThe UK has pioneered social investment products such as the Social Impact Bond, with the world’s first SIB operating in Peterborough. 

The UK and US are forging ahead in creating this new asset class which is the UK is estimated by to worth over $1bn by 2015 which is 38% year on year growth.

This is a new growth sector. While the social investment market may be relatively small, it has tremendous potential. This market is a driver for economic growth, as well as a responsible, strong and sustainable society.

There is untapped investor demand for social investment. An Ipsos Mori poll revealed that:

39% of wealthy individuals had an active interest in the social investment market; and

67% of wealthy individuals would be likely to invest in a financial product that benefits society as well as giving a good financial return.

There is untapped investor demand for social investment. An Ipsos Mori poll revealed that:

39% of wealthy individuals had an active interest in the social investment market; and

67% of wealthy individuals would be likely to invest in a financial product that benefits society as well as giving a good financial return.

This Trade Mission provides a great opportunity for both the UK and US to build on existing work and collaborate in building a global social investment market.

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Allia is a non-profit organisation with UK charitable status that creates financial instruments (bonds) for social benefit. It has two core, complementary aims: to raise funds for organisations delivering social impact and to promote culture change by engaging individual and corporate citizens in social investment.

Allia’s latest projects focus on raising debt finance for charities and providing risk-adjusted retail access to Social Impact Bonds and other equity type opportunities. The Retail Charity Bond will enable charities to raise loans of £3m or more from retail investors. It will offer charities a cost-effective way to raise medium-term asset finance as well as helping to establish a new asset class of listed and tradable ethical investment opportunities. The risk-adjusted bond programme will allow retail investors to keep their principal secure with the potential of receiving an additional return according to the results of a social impact bond or other at-risk impact investment.

Bridges Ventures is a sustainable growth investor whose commercial expertise is used to deliver both financial returns and social and environmental benefits. We believe that market forces and entrepreneurship can be harnessed to do well by doing good. The Bridges Social Entrepreneurs Fund aims to address the funding gap often faced by fast growing social enterprises looking to scale. Seeded by the Bridges Charitable Trust in 2008, the fund was launched in August 2009 and has raised nearly £12m for investment in scalable social enterprises delivering high social impacts and operating sustainable business models.

Big Society Capital is the world’s first social investment wholesale company. BSC has a vision of a sustainable UK social investment market that finances new business models and approaches to tackling entrenched social problems. BSC will work towards this vision through investing up to £600m of its own capital base and by acting as a champion of the market in general.

Big Society Capital was launched in April 2012 by the UK Prime Minister David Cameron. Since April, it has made £37m of investment commitments including: Social Impact Bond partnerships in Liverpool and London; a range of social investment funds including specialist funds focused on social franchising, community housing and community-owned renewable energy; and, direct investment into market infrastructure such as the Social Stock Exchange.

Bates Wells and Braithwaite (BWB) is a commercial law firm servicing a wide range of commercial, statutory, charity and social enterprises (and their owners and managers).

BWB has been at the forefront of the social investment market for over two decades. We represented the Bishop of Oxford in the 1991 case which established the ability of charities to engage in socially responsible investment. In 2002, we advised on the establishment of Charity Bank and later on CAF-Venturesome. Today, we remain at the cutting edge, advising Big Society Capital and other clients on leading social investment transactions and innovations.

Mission

Companies

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City of London Corporation is a unique local authority responsible for the Square Mile of London. Famous for the concentration and expertise of the financial institutions operating here, the City is committed to the development of the social investment market place, to ensure that social value is secured within the market mechanism. It has three strategic priorities to support this agenda; firstly, it seeks to engage with and support city financiers so that they may provide appropriate capital for social investment. The City of London has itself created a £20m social investment fund, as an example. Secondly, it is working to help open up the public procurement and private supply chains as marketplaces for social enterprises, without which organisations will not be ready to take on social investment. Thirdly, it is at the forefront of the debate around creating an enabling legal, fiscal and regulatory environment which will help to secure London’s place as a global centre for social investment.

The Social Investment strategy is a vital aspect of the City’s broader agenda to help connect the financial services and corporates with the needs and vision of its neighbouring communities.

Investing for Good was established in 2004 as a specialist provider of impact investment services to private banks, asset managers, foundations, charities and social enterprises. Its Social Bond programme addresses the significant shortage in quality investment propositions available to social investors in the UK and enables charities and social enterprises to access the social investment market at scale. Our package of services includes bond arranging, issuance, placement, listing on an exchange and impact reporting. In March 2012 we published The Good Analyst, a book about the power of analysis to reconnect money to social value which presents our methodology for impact analysis and draws on our experience of impact research to lay out an overview of where the practice is today, of how we got here, and a penetrating theory of analysis itself. At a time when the world is rethinking its values quite seriously, The Good Analyst argues for how a different kind of knowledge can play a pivotal role in reshaping for the better the relationship between money, impact, and the society in which we live.

Omidyar Network is a philanthropic investment firm dedicated to harnessing the power of markets to create opportunity for people to improve their lives. We invest in and help scale innovative organisations to catalyse economic and social change.

eBay founder Pierre Omidyar and wife Pam established Omidyar Network based on their conviction that every person has the power to make a difference. Our work enables people to discover that power, improve their own lives, and make lasting contributions to their communities.

The formation of Omidyar Network was inspired by Pierre’s experience at eBay, which he founded in 1995 based on his beliefs in the potential of individuals and the power of markets. Starting from the premise that people are basically good, Pierre created a platform that gave everyone equal access to information, opportunity, and the tools to pursue their goals. eBay allowed people to connect with others over shared interests and provided them incentives, like public feedback, to engage constructively with trading partners, thereby owning their marketplace reputation and ultimate success.

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P3’s main aim is to give people the practical skills and self esteem that they need to sustain an independent and self sufficient lifestyle by providing opportunities and support to help vulnerable people move from social exclusion to inclusion.

P3 offers successful and lasting routes out of social exclusion and homelessness by operating a variety of effective services to help to overcome the challenges that the public sector can no longer tackle alone in creating positive outcomes to people at real risk of social exclusion.

We’ve been around for over 30 years, working in some of the most deprived areas of the UK with some of the most at risk groups in our society, helping them to rebuild their lives. And we’re pretty good at it too. We support hundreds of people every day to take control of their lives and move towards social inclusion and healthy positive lifestyles.

P3 delivers a wide range of award winning services for people from all walks of life at a time and in a way that they need it.

Panahpur (meaning ‘Place of Refuge’ in Hindi) is a UK-based foundation founded in India in 1907. Today it seeks to use all of its capital holistically for its mission – which is rooted in a desire to see a world where all people experience justice, inclusion and empowerment. Panahpur has sought to support the genesis of a functioning impact investing ecosystem in the UK - through investment in infrastructure (e.g. the Social Stock Exchange, Social Finance Investment Advisory Service); investment product development (e.g. the Big Society Finance Fund); and by making investments, both direct and through intermediaries and fund managers. Panahpur makes investments in the UK and Europe, and in the global south. Panahpur is represented on the advisory board of Big Society Capital, on the Investment Committee of the Investment & Contract Readiness Fund (operated for the Cabinet Office by The Social Investment Business) and on a number of other advisory groups and boards.

Social Enterprise UK (SEUK) is the national membership body for social enterprise in the UK, and committed to working with partners across sectors to both support social enterprises directly, and also strengthen and grow the impact of the sector as a whole. SEUK members range from innovative start-ups to large, established multi-million turnover social enterprises, and also include private and public sector organisations supportive of the movement.

SEUK represents its members’ interests at national level (including as a strategic partner to six government departments), conducts sector-leading research, shares information and news, and provides direct support, networking and training for its members. SEUK also works in close partnership with private sector organisations such as RBS, PwC, O2, Deloitte, Santander and others on developing and implementing specific programmes in the field.

SEUK is the policy lead to the Cabinet Office on social investment, and chairs the Social Investment Forum which brings together the CEOs of the leading UK social investment intermediaries.

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SIB GroupThe Social Investment Business (SIB) is a specialist fund manager and has made and managed over 1300 investments in civil society organisations ranging from under £5,000 to almost £7 million. SIB invest in viable, non-bankable projects: facilitating their move into more enterprising ventures; strengthening them; investing in excellence; and bringing to scale the most innovative ideas. SIB bring finance, knowledge and expertise to help civil society organisations thrive – improving their infrastructure, increasing their capacity, helping them bid for, and win, public service contracts. The Adventure Capital Fund (ACF) is the parent charity of The Social Investment Business and funds community enterprises. The fund packages that ACF offer have the potential to transform neighbourhoods across the country. ACF back community enterprises that could make a real difference. By offering a combination of financial investments and expert support, ACF help these enterprises to become stable, soundly run businesses that will survive long into the future.

Social Finance was established in October 2007, bringing together a unique blend of financial, social sector and government expertise which works to identify ways of improving access to capital for those looking to drive social change. Social Finance’s initial team supported the work of the Commission on Unclaimed Assets, which recommended the establishment of a Social Investment Bank, an idea that later became Big Society Capital. In September 2010 Social Finance launched the world’s first Social Impact Bond – raising £5m to finance an intervention which targets reducing re-offending among ex-prisoners in Peterborough, UK. We continue to develop the Social Impact Bond model and its application in areas such as: homelessness, criminal justice, children in care and youth employment; and recently set up a joint working group with the Centre for Global Development to explore how similar techniques could facilitate international development finance. In our other work Social Finance provides a range of capital raising and financial advisory services to help build the social investment market. We are dedicated to finding ways to raise capital through robust investment propositions.

Triodos Bank is one of the world’s leading sustainable banks. Since 1980, the bank has pioneered a groundbreaking, commercially successful approach to money that values people, the environment and culture, as well as profit. The bank has over €6bn of assets under management.

Triodos Investment Management is a 100% owned subsidiary of Triodos Bank and manages funds worth over €2bn investing in both Europe and emerging markets. Fund themes range from climate and energy, microfinance, sustainable trade, organic food and agriculture, arts and culture, sustainable real estate and listed companies with above average environmental, social and governance (ESG) performance.

In the UK, Triodos lends over £500m to social and environmental organisations and manages funds investing in renewables projects and environmental businesses. We also have a corporate finance team working with social and environmental organisations to help them raise capital. The team have worked on two payment-by-results social impact bonds and structured many other innovative social investments for clients ranging from a social enterprise providing training and employment for ex-offenders to a charity housing those with learning disabilities.

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contact

details

ALLIATim Jones, CEO - tim.jones@allia.org.uk

BRIDGES VENTURES Antony Ross, Partner - antony@bridgesventures.com

BIG SOCIETY CAPITALMatt Robinson, Director of Strategy & Market Development mrobinson@bigsocietycapital.com

BATES WELL & BRAITHWAITELuke Fletcher, Senior Associate - l.fletcher@bwbllp.com

CITY OF LONDONKatie Hill, Social Investment Advisor - katie.hill@cityoflondon.gov.uk

INVESTING FOR GOODGeoff Burnand, Chief Executive - gburnand@investingforgood.co.uk

OMIDYAR NETWORKVineet Bewtra, Director, Investments - vbewtra@omidyar.com

P3Martin Kinsella, CEO - martin.kinsella@p3charity.org

PANAHPURJames Perry, CEO - james.perry@panahpur.org

SOCIAL ENTERPRISE UKNick Temple, Director, Business & Enterprise nick.temple@socialenterprise.org.uk

SIB GROUPJonathan Jenkins, Chief Executive - jonathan.jenkins@sibgroup.org.uk

SOCIAL FINANCEJane Newman, International Director - jane.newman@socialfinance.org.uk

TRIODOSAlex Connor, Institutional Investor Relations Manageralex.connor@triodos.co.uk

Many thanks to all

our supporters and

partners