Week 6 - finding the right routes for repayable investment

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Written by

Jeremy Rogers, Chief Investment Officer

The scale of this crisis is so big that the majority of organisations need grants and government support most. That is not only true for charities and social enterprises - where the blending of grants and investment is common– but unusually also for many purely commercial enterprises.

Of all the government support schemes, the furloughing of staff has been most effective and has recently been extended to June, which has been a great support to many organisations in our portfolio. However, the scheme has not worked for all charities and social enterprises, where revenue and demand for services are not always linked. The system prevents furloughed staff volunteering for their own charity, even if revenue has collapsed and need increased. This has forced some to make tough choices between mission and survival.

As a social investment sector, we have aimed to work collectively and be clear where repayable investment can help alongside other support, and where it cannot. For our existing portfolio, the most significant step was to ease cash flow by offering capital and interest rate holidays where appropriate, which so far hundreds of organisations in our portfolio have taken up. New investments so far have been mostly in emergency loans to cover working capital, and equity investments to expand service delivery through COVID-19 increased demand. In many cases we are hearing repayable investment will be better used to support recovery rather than crisis response.

Five weeks ago, we set out our three priorities in this crisis and want to keep you updated on our progress.


Sharing information

Our social investor and social enterprise COVID-19 hubs have up to date information on support available. While many significant grant programmes are emerging, we know many more are needed. We continue to work with government and others to build additional sources of support, including potential blended finance programmes combining grants with investment. We are also working with our partners in the social sector and our partner funds to better understand and map the needs of enterprises so that we can provide the best possible support in the months ahead.

Adjusting existing funding

Our portfolio comprises a mix of equity, social property, debt, community renewables and outcomes financing. We believe that mix is important to deliver social impact and sustainable returns. That diversity of investments has also helped attract the over £1.4 billion of investors who have so far invested alongside us.

Our venture funds are facing a more capital constrained environment and challenges adapting business models. Many tech-for-good solutions are also seeing significant increases in demand. For example we first invested in Togetherall through Impact Ventures UK in 2014. It provides an online peer-to-peer community for mental health support. It has been increasing its service through the crisis, including last week the Canadian Prime Minister Justin Trudeau making its offering available to all Canadians over the age of 16. We have written an update this week on what we are seeing across our impact venture portfolio.

Exploring new funding

In the last few weeks we have prioritised signing new investments into Bethnal Green Ventures and Eka Ventures – enabling both to continue investing in the response and recovery while they raise further investment from others.

Also in the venture space, we have been supporting the British Private Equity & Venture Capital Association and others to make the case with government for an early stage venture funding crisis response, to sit alongside the Coronavirus Business Interruption Loan Scheme. This was announced by the chancellor earlier this week, and includes a bridge fund requiring private sector co-investment and grants through Innovate UK. We will be working to ensure this funding reaches impact-driven startups. More on our approach to impact venture investing here.

In any crisis, the quickest way to deliver new funding is through existing routes. We recently redesigned the Community Investment Enterprise Facility so it could make small loans in deprived areas using the Coronavirus Business Loan Interruption Scheme. The fund's delivery partners have seen significant interest and are actively lending, and we are fundraising to increase its capacity.

Creating new routes takes longer. With Social Investment Business, we identified a month ago the need for an alternative for charities and social enterprises to access the Coronavirus Business Loan Interruption Scheme. We were concerned that many charities and social enterprises would be turned down by mainstream banks who are not familiar with their business models - and we are seeing increasing evidence of that. We hope the new Resilience and Recovery Loan Fund will open for applications this week; we are currently waiting on final British Business Bank accreditation.

We are all learning where repayable investment can help in a pandemic alongside other support, and where it cannot. We will continue to do our best to work with others to support organisations through this period. As the need for investment becomes clearer, we are looking for other investors to join us in the vital mission to support sustainable enterprises with a social purpose to rebuild better. We are already working with many fantastic people to try and achieve this, if you’d like to help in any way, do get in touch.

Jeremy Rogers

Jeremy Rogers

Chief Investment Officer
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