Readers will likely be familiar with our strategy of investing our endowment using a “total impact approach”. In a nutshell, this means that whilst grant making is central to our mission, we want to use our endowment to maximise the amount of social impact that can be achieved. With this in mind we built a “bull’s-eye” target investment model around the grants, seeking to invest the endowment as closely in line with our mission as possible whilst still meeting our financial aims. (For more detail, look at our previous blogs). So how are we getting on?
Last autumn we appointed Rathbones to manage the endowment and I’m pleased to say the process is going very well so far. Our portfolio today is invested roughly as follows:
Tier 1, charities and social enterprises delivering social impact in the UK: 29%
Tier 2, charities and social enterprises delivering social impact elsewhere: 1%
Tier 3, other organisations delivering social impact: 16%
Tier 4, best-in-class ESG: 54%
The first tier aligns directly with our social investment mission and in an ideal world would represent 100% of our endowment. However, taking into account the 10-year life of the fund, our (modest) return target, risk appetite, etc. we knew it was highly unlikely there would be enough assets available at the right price for this to be simply achieved on day one. Hence our tiered approach with best-in-class ESG/SRI assets representing our least impactful investments and the intention to transition everything towards Tier 1 as soon as reasonably possible.
Rathbones has done a great job in building a portfolio where almost 30% of the assets are already in the first tier and almost half of the assets are in the first 3 tiers. The outer tier contains a mixture of direct bonds and “ethical” funds which will be the first to be sold as and when higher tier assets become available.
Just as importantly we feel we have developed an open, positive and transparent working relationship with the investment team looking after our portfolio. We receive monthly updates on the portfolio in a manner tailored to our requirements and it is clear they understand what we are trying to achieve. Each potential investment is reviewed by Rathbone Greenbank to ensure it is eligible for inclusion in the portfolio from an impact perspective and assigned to its appropriate tier. The Access Endowment Investment Committee has reviewed each rating and, whilst we’ve generally agreed, this has also led to some interesting (and, thankfully, amicable) debates!
This raises an interesting point with respect to our taking a very active interest in the portfolio whilst recognising that we have handed over day-to-day management of the portfolio to the Rathbones team. We cannot, and indeed should not, be making individual buy and sell decisions. However, by being clear with our objectives from day one and investing the time to develop a healthy working relationship with the manager, we feel we have got the balance about right.
I believe I speak for the whole Access team when I say that I am delighted with what we have achieved so far with the endowment. Instead of ignoring the impact of our investments – as regrettably is still the approach of most investors – we have started to show that it is possible to steer capital towards investments that achieve some (or a lot) of impact without compromising on our financial objectives. The endowment is not perfect (is there such a portfolio?) and there is much more we want to achieve, but we are on a journey and hope it is encouraging others to do likewise.
The next step is to publish the full list of our investments, so you can see exactly what we own. We hope to be doing that very soon, so stay tuned!
Martin Rich, Chair of Access Endowment Investment Committee