bridges ventures overvie€¦ · support sustainable growth • a high-calibre team: our team,...

Bridges Ventures Overview Steve Morrison May 2014

1. The impact investing landscape

2. Bridges Ventures overview

3. Integrating impact analysis

4. Case studies

Agenda

3

Spectrum of capital

Blue Orchard

Dexia Micro-Credit Fund

Triodos Renew-

ables Europe Fund

Generation IM’s

Climate Solutions Fund

Bridges Ventures

Sustainable Growth Funds

ProCredit Holding

JPMorgan Urban

Renaissance Prop. Fund

Lyme Northern Forest Fund

Charity Bank Root Capital

Bridges Ventures

Social Entre-preneurs

Fund

Aavishkaar

Acumen Fund Ignia

Bosques Pico Bonito

4

Bridges Ventures

Property Funds

Across Asset Classes

111 Them

atic

Im

pac

t-fi

rst

Any investment that supports

economic development in an

underserved geography

Investments in enterprises that

provide goods or services that

inherently have impact

Place People Product

Investments in enterprises that

employ disadvantaged

populations.

Affordable

Housing Fund

Women’s Loan Fund

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Fixed Income

Public Equity

Real Estate

Real assets

Private equity

Commodities

Thematic Private Equity

Ass

et C

lass

es

Regional Economic Development Fund

Across ‘Impact’ Classes

Social Stock Exchange

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An explosion of players in the last decade

Source: Accelerating Impact, a report prepared by E.T. Jackson and Associates and commissioned by The Rockefeller Foundation 2012




4. Case studies

Agenda

• Thematic focus: we invest in sectors where a pressing social or environmental need creates strong pockets of growth, and we select for investments where impact and commercial returns go hand-in-hand

• Proven expertise: we are active investors who have proven expertise in engaging with our investees to support sustainable growth

• A high-calibre team: our team, Board and Advisory Board are motivated to use their operational and financial expertise to deliver superior returns for investors and society-at-large

• Impact-driven investment approach: a distinctive approach of selecting businesses because of their potential impact and then engaging with them to drive both value and impact

Overview Bridges Ventures An innovative specialist fund manager, dedicated exclusively to using an impact-driven investment

approach to create superior returns for both investors and society at-large

Growth

20%+ revenue growth in our portfolio, despite tough economic conditions

Employment

Supporting 1,700 jobs (15% year-on-year growth); 32% in underserved areas and 14% formerly unemployed

Underserved Areas

86% of portfolio in the most deprived quartile, with a 4.7x multiplier on investment

Environment

400k tonnes CO2-equivalent emissions avoided; 500k tonnes of waste diverted from landfills

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Overview We manage £460m across three fund types, all of which have explicit social impact objectives

Sustainable Property Fund

Invests in properties in underserved areas

and environmentally sustainable buildings

that have potential to make strong financial

returns as well as delivering social and

environmental impact.

£28m, launched 2009, 8-year fund

Target IRR 20%

CarePlaces Fund

A partnership with leading care home

developer Castleoak. Will predominantly

invest in off-market, pre-let care home

developments supplied by Castleoak.


Target IRR 12-14%

Invests in scalable social enterprises

delivering high social impacts and

operating sustainable business models.


Target IRR single digit

Social Entrepreneurs Fund

Invest in growth businesses across

four impact themes:

• Underserved areas

• Environment

• Education & Skills

• Health & Well-being

Fund I: £40m, launched 2002

Fund II: £75m, launched 2007

Fund III: £125m, launched 2012

Target IRR 15-20%

Invests in charities and social enterprises to

deliver programmes designed to improve

social outcomes in areas such as education,

employment and housing.

£12m (first close), launched 2013, 10-year

fund

Target IRR single digit

Social Impact Bond Fund

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Sustainable Growth Funds Fund I: £40m, launched 2002

Fund II: £75m, launched 2007

Fund III: £125m, launched 2012

Target Net IRR 15-20%

Sustainable Property Fund £28m, launched 2009,

8-year fund

Target Net IRR 20%

CarePlaces Fund £47m, launched 2011,

6-year fund

Target Net IRR 12-14%

Social Entrepreneurs Fund £12m, launched 2009, 10-year fund

Target Net IRR single digit

Social Impact Bond Fund £12m (first close), launched 2013, 10-year fund

Target Net IRR single digit

Bridges Ventures: A Platform of Funds

Investment Strategy Sustainable Growth Funds: Health & Wellbeing

These drivers generate tangible opportunities in key sub-sectors

Wellbeing • Targeted prevention and wellness services to keep individuals out of care

system altogether

Home care • Assisted by technology, much chronic care can be delivered at home or

from the community cost-effectively and at high level of quality

Outsourcing of services

• Outsourcing of specialist/support services can provide substantial cost savings for hospitals, allowing them to focus on their core role

Major drivers for private capital to play larger role in provision of healthcare

• Shift in demographics: an ageing population and longer life spans increases incidence of long-term chronic conditions, thus placing increased demand on healthcare infrastructure and greater focus on preventative care

• Budget constraints: Pressure on public finances necessitates the use of more cost- and capital-effective solutions for provision of healthcare

• Technology: Technology developments leverage expensive medical skills and enable the delivery of treatment and care outside the hospital setting

Challenges

Opportunities

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Underserved Markets

• Unemployment • Underutilised

property • Scarcity of capital

Sustainable Living Education & Skills Health & Well-being

• Need for rapid decarbonisation

• Pressure on natural resources

• Skill shortage • Stagnating school

performance • Budget constraints

• Ageing population • Pressure on NHS

resources • Rising chronic disease

Challenge

Impact performance

• 200,000+ users • 30% first-time users • Pioneer of 24/7 low-

cost, accessible model

• 2,530 learners in 2012 • 333 previously

unemployed now in full-time work

• 882 employers hiring from Babington

• Cumulative100k+ tonnes of waste oil diverted from landfill

• Cumulative net saving of 300k+ tonnes of CO2e

• 85% supplier spend in underserved areas

• 73% wage bill to employees in underserved areas

Commercial performance

• Sold for 33% IRR and 4.7x money multiple for Fund I

• 27% topline growth in 2013

• Sold for 50% IRR and 3.7x money multiple whilst retaining 25% stake 12

• Sold for 50% IRR and 9.0x money multiple for Fund I

Sustainable Growth Funds Impact + Commercial returns are in ‘Lock-step’

Underserved Markets

•Unemployment •Underutilised

property • Scarcity of capital

Sustainable Living Health/Well-being

•Need for rapid decarbonisation

• Buildings as high energy consumers

•Ageing population • Pressure on NHS resources •Unmet demand for quality

elderly care

• Growing number of care homes serving those needing high acuity and dementia care in an under provided market

• Designed to provide highest quality accommodation and facilities

• Solar PV units on all 25 buildings, providing over 50% of energy

• 56% reduction in carbon footprint relative to baseline

• Most deprived 1% of England

• 60 jobs on site + 11 jobs off-site

• Total local economic impact of c£2.7million p.a.

• 350 student units

• Generating an IRR of 30% and a 2.5x money multiple

• Increasing demand by operators for good quality care home properties

• 50%+ energy cost savings for tenants

• Increased occupancy by 35% since investment

Juniper House

Property Funds Impact + Commercial returns in ‘Lock-step’

Challenge

Impact performance

Commercial performance

Social Sector Funds Mission-driven models addressing tough societal challenges

Underserved Markets

• 14-19 year olds who are Not in Education, Employment or Training (NEETs) tend to suffer poor life outcomes, with greater cost to society

Education/Skills Health/Wellbeing

•Domiciliary care providers typically operate a low-paid, high churn employee model resulting in lower quality of care for service users

Employee-ownership model enables CASA to benefit from more motivated employees and lower turnover, resulting in better care outcomes for service users

Cross-subsidy model Trading surpluses enable HCT to offer affordable transport for disadvantaged individuals and community/non-profit groups

• 230,213 passenger trips provided to disadvantaged individuals

• 66,616 passenger trips provided to community groups

• 879 people receiving care • 9% staff turnover • 78% of service-user visits undertaken by the same prime or secondary carer

• Lack of affordable, accessible transport options for socially-excluded individuals

•Not commercially viable to serve ‘pockets’ of society

• Payment by Results model • Mentoring and vocational

support • Cost £1-3k per child

• 842 young people received support so far, with 61% resulting in improved attitude and behaviour in school, 54% improving school attendance and 73% gaining a qualification

Challenge

Financially-viable model

Impact performance




4. Case studies

Agenda

Investment Approach: Responsible Investing+ We have developed a distinctive 3-stage approach

Select

Engage

Track

Our 3-stage “SET” process focuses not just on what our

portfolio companies do but also on how they behave

Bridges Ventures is a signatory to the UN Principles

for Responsible Investment and is an active

contributor to their impact assessment process

Our IMPACT Scorecard is tailored to each portfolio

company, with a focus on materiality and practicality.

Thematic

KPIs

ESG Value

Creation

ESG Risks

Deal origination Pre-Approval Post-Investment

Track progress to inform

timely management

decisions and report

back to our investors

Engage to manage ESG risks as well as

identify opportunities to create additional

value

Select investments where impact and

commercial returns go hand-in-hand

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http://www.unpri.org/

18 Source: Bridges Ventures, 2014

Integrated Analysis: The IMPACT Radar

The IMPACT Radar - ESG

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20

The IMPACT Radar - ESG

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The IMPACT Radar - Alignment

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Bridges Ventures Impact Results




4. Case studies

Agenda

Investment Strategy Sustainable Growth Funds: Health & Wellbeing – Case Study

The Gym provides low-cost (from £10.99/month) health and fitness facilities in purpose-built gyms which are open 24 hours a day. Projected to have a portfolio of 30+ sites by end 2012, the majority of which will be in underserved areas

Bridges Ventures' Role

Bridges Ventures incubated this idea from the concept stage, hired the management team and provided the initial finance for the fit-out of sites, starting with Hounslow in July 2007

Financial Performance

• Partial exit delivering 50% IRR and 3.7x MM • Bridges retains a 25% stake, enabling

investors to benefit from the future growth of the business

Impact Performance

• 165,000 users in 2012 • 34% first-time users • Pioneer of 24/7 low-cost, accessible model

in the UK

Orla is a provider of acute medical care to patients in their own home. The service is delivered to hospitals at 80% of NHS tariff against cost pressures and efficiency backdrop. The model has been shown to be successful in improving patient outcomes and high patient satisfaction


Bridges Ventures incubated this idea from the concept stage with management and provided the initial finance for business and concept development in April 2012

Performance to date

• NHS contract signed on 24 October 2013 with full operational service launch December 2013

• First mover advantage within niche sector

Impact Metrics

• Reduced mortality • Reduced re-admissions • Improved patient satisfaction • Beds free for alternative use including

elective waiting lists • Multiplier effect from model becoming a

reference case for others to follow, with impact benefits propagating

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Investment Strategy Sustainable Property Fund: Case Studies

Joint venture with Castleoak to develop the UK’s most environmentally-friendly care homes that are pre-let to Barchester Healthcare on 35-year index-linked leases

Bridges Ventures Role

Bridges Ventures provided c.80% of equity to develop three c.60-bed care homes in England


• All care homes were completed on time and c.£425k below overall development budget

• To date, $3.4m of proceeds generated from refinancing and rent

• Forecast IRRs 20%+

Impact Performance

• Environmental leadership for new-build care homes in the UK: 1 Passivhaus-accredited and 2 BREEAM “Excellent” rated, with potential for 30-60% reduction in carbon emissions relative to a standard baseline scheme

• Castleoak working to establish a nationwide standardised assessment of patient feedback to ensure high quality of care from operators

A student housing development in Whitechapel, London. 50:50 JV partnership with Chancerygate, a private development company with significant in-house construction expertise

Bridges Ventures Role

Bridges Ventures provided 50% of the equity requirement to fund the development


• £48m project completed in March 2012 on time and budget

• Ground floor pre-let to Tesco and 8 private flats sold at budget at £3m

• 1st year occupancy rate of c.85% projected • Projected IRR 20%

Impact Performance

• Forecast shortfall of 47k student beds in London by 2016 as only 15% of students have access to university-provided rooms

• Located in Tower Hamlets in most deprived 1% of England

• BREEAM “Very Good” rating for sustainability of the building, including a CHP energy centre

• Potential for 50%+ reduction in carbon footprint relative to a standard baseline scheme

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Investment Strategy Social Entrepreneurs Fund: Case Studies

A co-operative company that builds and develops employee-owned franchise companies providing domiciliary care to older, disabled and vulnerable people


Bridges Ventures made initial investment of £400k, structured as a “social loan” where interest is turnover-linked, to strengthen core business and provide robust platform for growth.


• >150% growth to >12.5k hours of care a week through six franchise companies

• £7m turnover, with 5 of the 6 FCs now profitable, delivering positive overall EBITDA

Impact Performance

• 500+ employees, 91% from underserved areas • £3m in net wages paid to carers in 12 months • >80% of care visits delivered by ‘key carers’

(employee ownership structure reduces staff turnover and enables more consistent service)

A registered charity that operates commercial bus routes as well as not-for-profit community transport services for those unable to use conventional public transport and related job-training services


Bridges Ventures acted as lead investor, investing £1.5m to cornerstone a £4.1m total capital raising via an innovative financial structure including a “social loan” where interest is linked to increase in turnover


• Average 20% growth per annum for last 5 years • >£40m turnover, from 370 vehicles, operating

out of 12 depots in London, Yorkshire, Humberside, the Southwest and the Channel Islands

Impact Performance

• >230k passenger trips provided to disadvantaged individuals

• >60k passenger trips provided to community groups

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Investment Strategy Social Impact Bonds: Case Studies

Action for Children is a large national children’s charity. The Manchester project delivers Multi-dimensional Treatment Foster Care to young people in residential care homes, to help them transition into stable foster care placements


Bridges Ventures acted as sole investor, structuring the deal, designing the governance and incentive share and advising AfC on performance management requirements for the project.

Challenges

• SPV contracting structure not possible due to foster care regulations

• AfC + Manchester had strong desire to contract directly, and minimise SIB Overhead

Actions

• Bridges acting as co-commissioner alongside Manchester, to shield AfC’s P&L impact

• AfC receive placement payments directly (thus taking on some referral + utilisation risk)

• Bridges + AfC share outcomes risk

Community Links is a charity in East London, which offers a wide range of services for young people and the local community. It developed a 1-1 mentoring intervention to help young people re-engage with school and into employment.


Bridges Ventures acted as lead investor, structuring the deal, selecting the SPV board and supporting Community Links directly to manage performance of the contract

Performance

• The 1-1 mentoring intervention is difficult to performance manage, and hard to market

• Community Links chose to place the project in a division with little experience of PbR

Actions

• Supported CL with marketing and reforecasts • Adjusted intervention to be more standardised • Implemented turnaround manager • Moved project into a division with PbR skills

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I

Contact us Bridges Ventures 1 Craven Hill London W2 3EN

Telephone +44 (0) 20 7262 5566 Fax +44 (0) 20 7262 6389 Email [email protected]

www.bridgesventures.com Bridges Ventures LLP is authorised and regulated by the Financial Conduct Authority

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Investment Strategy Social Impact Bonds: Market Overview

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bridges ventures overvie€¦ · support sustainable growth • a high-calibre team: our team,...

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