In his last blog, Martin Rich, the chair of our Endowment Investment Committee, outlined the progress we have made with Rathbones, our investment manager, in seeking to maximise the impact of our endowment. In it he made a commitment for us to regularly publish more comprehensive details of our portfolio. As we are approaching the first anniversary of having deployed our funds with Rathbones, it is timely to share more detail about the composition of our portfolio as of the end of May 2017.

Firstly it’s important to say that this is a snapshot in time of where we have got to on our ongoing journey of aligning our endowment as much as possible to our mission. We know it is not perfect and you may disagree with some of the classifications we have made. However, we want to share our process because we hope it will be helpful as other foundations consider how they can go on the same journey.

Avid readers of our blogs will recall that we have adopted a bulls-eye model which underpins our approach to the impact we want to see. We have drawn this broadly, as outlined below, and this shouldn’t be confused with the much more focused impact we seek through our grant programmes.

Given our fixed life and cash flow requirements, our portfolio is predominantly fixed income. The centre of our target is investments directly into charities and social enterprises in the UK. This represents the closest alignment with Access’s mission and comprises mostly charity bonds. We seek to maximise our holdings here, but there is a limited supply of these bonds and we don’t want to crowd the market or be overly exposed to any single issuer. Therefore we then prioritise investments in tiers 2 and 3 as per the model below. Only when these products aren’t available do we invest in tier four, where we have selected organisations that are considered “best in class” in their ESG ratings.

The fifth and final tier is cash, with Rathbones holding a small balance on our behalf to enable them to invest in tier 1 bonds when they become available without redeeming other bonds, and also providing a measure of short term liquidity. This covers cash to be returned to us each quarter to make grants that are in direct furtherance of our third sector capacity building mission and to help to cover our costs.

All of this classification has some degree of subjectivity, of course, and there will doubtless be organisations included that people have different views about. However, our investment is not an endorsement of any issuer’s activities, but rather that Rathbones believes that the commitment of each one to a range of impactful social values makes them worthy to be included.

As of 31 May 2017 the percentage of the endowment (total balance of £45M so far) in the different tiers was:

So to break that down in more detail let’s start with tier one, charities and social enterprises delivering social impact in the UK:-

With 29% of tier 1 currently being held in Motability issued bonds, this high proportion reflects both the availability of a range of bonds and the fact that they are so synonymous with supporting those with disabilities.

Social and specialist housing also features highly in this tier (providing 49% of the total), offering support to some of the most vulnerable members of our communities. Hence Greensleeves Homes Trust, London and Quadrant Housing, A2D, Golden Lane Housing, and Hightown Praetorian and Churches are all included within our investment portfolio.

Places for People Leisure (9% of tier 1) is a social enterprise subsidiary of the Places for People Group that develops and manages leisure centres on behalf of local authorities.

The Wellcome Trust (12%), leading the way in biomedical research to improve people’s health and wellbeing, and the Charities Aid Foundation (1%), complete our portfolio of tier 1 investments.

Currently our only tier 2 investment is in the International Finance Facility for Immunisation (IFFIM), which supports GAVI, the Vaccine Alliance helping the world’s poorest countries. For simplicity in our charts we include it with tier 3 and it represents 3% of the combined group.

Tier 3, the bonds from other organisations making a social impact, comprises the following:-

Three development banks – African Development, Asian Development and KFW in Germany – together with Lloyds Bank’s ESG bonds make up 43% of our tier 2/3 portfolio, recognising the obvious availability of bank bonds, as well as the major impact these banks can have on generating social impact. In particular, Lloyds specifically issued its ESG bonds in support of its Helping Britain Prosper Plan.

Places for People also appears in this group with 40% of tiers 2 and 3, (as well as appearing in tier 1 and tier 4), and this is due to the different roles played by each part of this large group. So we have divided our investments from PfP into three distinct sections: 

tier 1 contains that element that relates to their social enterprises; 

tier 3 contains social housing and other socially impactful services such as development and regeneration services, financing for first-time buyers, supported accommodation and at-home care services, and job and training opportunities for tenants;  

tier 4 comprises property management services for private rented accommodation and low-carbon residential & commercial property development.

Finally, leading impact investor BlueOrchard Microfinance Fund makes up the remaining 14% of tier 2/3.

Tier 4, investments in other organisations that have a range of “best in class” ESG indicators, includes the following organisations and alongside each one we show the primary attribute that we feel enables them to be part of our social investment portfolio.

• 3i Group: Private equity/venture capital investor with active approach to responsible investment
• Aggregated Micro Power Infrastructure: Developer of small-scale biomass energy projects
• Aviva/Friends Life: Insurance and investment group with leading approach to climate risk management, also displays high levels of charitable involvement
• AXA: Global insurance group with strong responsible business performance
• Bupa: Health insurer and provider of residential care for older people
• Land Securities: Property investment group using socio-economic impact assessments and lifecycle carbon analysis
• Marks & Spencer: Retail group integrating sustainability into core business practices
• MuniFin: Finnish credit institution providing finance to public sector organisations and local government
• Places for People Finance: Residential property management services and low-carbon property development
• Severn Trent: Best of sector provider of water & wastewater services with interests in renewable energy
• Svenska Handelsbanken: Swedish banking group with leading policies on gender equality
• Thrive Renewables: Renewable energy investment fund supporting small-scale UK projects
• Transport for London: Local government body responsible for managing London’s public transport system

Within tier 4 we have also temporarily invested in a number of ethical funds – EdenTree Amity Sterling Bond, Kames Ethical Corporate Bond, Rathbone Ethical Bond and Standard Life Ethical Corporate Bond – and these will be redeemed when more tier 1 to 3 investments become available or the capital is required for our core grant making activities.

Overall we have a mandate to make a financial return as well as achieve social impact. We manage this through keeping a very close eye on forecasts of available cash over each quarter of our life, as well as the overall market-aligned rates of return. We are very happy with the financial performance of the portfolio and believe that we can be proud of the social impact it is helping to support, whilst recognising there is still more to come.

We appreciate all of the support we receive from the team at Rathbones who have delivered the outcomes described in this report, as well as providing ongoing data and feedback. They have fully justified our faith in them when we appointed them some 12 months ago.

Rob Brown, Interim Finance and Operations Manager, Access – the Foundation for Social Investment