Blue and Red Investing

I wrote last time about our newly formed Endowment Working Group.

The Group has been established to consider how best we invest our £60m endowment from the Cabinet Office during the next ten years before we use the funds to make grants, in grants in a way that generates the maximum social impact.

We met last week and it was an invigorating and thought provoking discussion! We started by considering the framework we might use to determine our Investment strategy – broadly thinking about the types of assets we might choose, ranging from those with a purely financial return (and very little social impact) to those with maximum social impact but potentially minimal financial return. We called the purely financial/minimal impact assets “Red” and the social high impact/minimum financial assets “Blue.”

We used the below diagram, adapted from one developed by Bridges Ventures, to aid our thinking. 


It seemed to us that many organisations looking to invest with impact start off with an existing “Red” portfolio and look at ways to make it “Blue” – this may be by starting with the exclusion of investments relating to industries that arguably harm society (e.g. tobacco) and then looking for investments that correlate with the impact they wish to create (e.g. companies with great environmental policies).

As we discussed this spectrum for Access, we came away from the conversation thinking, what would a portfolio look like that was all “Blue?”  In reality, this may not be possible, given the availability of investments in the marketplace and our time horizons, but perhaps this should be the starting point – constantly evaluating our portfolio to ensure we are including investments which have the maximum social impact possible.

This led us on to consider, how does Access define impact? If we want to invest to generate social impact, what should this impact look like? Our mission is critical in defining this impact – namely, Access exists to bridge the gap between smaller charities and social enterprises and social investment. We ultimately want to aid the sustainability and resilience of charities, social enterprises and the sector as a whole. These goals and aims will influence the impact that we would seek in determining which “Blue assets” to invest in. Specifically, it might mean considering the “S/Social” and “G/Governance” of ESG over the “E/Environment,” although we are still working on this! Watch this space for more, as we continue to define our investment strategy.

Lastly, we spent some time reviewing our financial model which we are using to aid our decision making. We are spending time looking at the impact of different types of investments on our overall return, thinking about our risk appetite and considering what it will ultimately mean for the money we have available to distribute by way of capacity building grants.

We are meeting again in two weeks’ time to continue the conversation and I will be sure to write following this. I was struck this week about what an incredible opportunity we have, to help pioneer this approach to investing – as well as the mandate to experiment, we also have an extremely supportive and willing Board who are taking an active role in shaping what this looks like. I look forward to sharing with you again soon!