The clues are in the names. Access’s work is all about opening up social investment so that barriers to accessing finance are removed and more organisations can benefit. We called our major investment readiness fund the “Reach” Fund to highlight how we wanted to enable social investors to be able to reach further into the charity and social enterprise sector.
While our dashboard shows some encouraging trends in terms of social investment flowing to smaller organisations and increasingly those based in the most deprived communities, we know that more needs to be done to ensure that investment is flowing to all parts of the sector that could benefit, including organisations led by underrepresented groups and those organisations tackling structural inequality.
The initial EII report identifies a number of different approaches to equality impact investing. Those relevant to Access’s work include:
- Investing in diverse social entrepreneurs and organisations that have diverse leadership and teams, and exhibit wider good equality practice across their business and supply chains.
- Investing in equality organisations whose primary purpose or mission is advancing equality and reducing inequality whether through services, goods, policy change or other activities.
- Investors taking steps to improve their own organisational equality policy and practice, as well as supporting this in the wider ecosystem in which they operate. This is an area which has been championed by the Diversity Forum.
Earlier this year the Access board took stock of our record in each of these areas in the context of Access’s mission and the mandate of our different programmes. It’s a mixed picture so far. The board also discussed priority actions for further work.
Diversity in the leadership of the charities and social enterprises we are supporting
The first point the board discussed is that unfortunately for many of our more established programmes we don’t know how diverse the leadership teams of organisations are because we don’t have good data on their protected characteristics. This is partly a historic issue of mandate. For example the Growth Fund was designed to tackle the gap in the supply of small scale unsecured debt flowing to charities and social enterprises, and while it was always intended that the fund would expand the reach of social investment to more organisations, the diversity of the leadership of borrowers was not one of the metrics selected. Some funds have chosen to gather this data and so they can track their own progress.
We do, however, have somewhat anecdotal information about how our blended programmes and targeted pre-investment grants via the Reach Fund, have supported fund managers to be able to reach more diverse organisations. With the Reach Fund this is partly because it has paid for time to allow the fund manager to get to know a potential applicant and not just to just rely on the formalities of an application. The evaluation from 2018 reports views from fund managers, with one typical response:
“[The diversity of borrowers is] Better in terms of ethnicity, gender. In the past, people have had an education level, and experience level that the system is biased … Reach Fund has enabled a turnaround in these cases.”
On newer programmes, including the Enterprise Development Programme (EDP) we have started gathering better data. One of the reasons for introducing the equality strand to EDP was to work with Equally Ours (our sector partner) to improve our performance in this area across our work. We were encouraged by the increased diversity achieved in the latest cohort recruited to the programme across all of the four sectors combined (60% of the cohort identify their leadership as having at least one protected characteristic). Yet we remain worried that the cohort application process may still somehow have been tougher for them to make it through – as such organisations made up an even higher proportion of initial applicants (73%).
Better recording and gathering of this data will be a priority for new programmes moving forwards, for example we have asked fund managers to specifically gather this information for investments made through the blend for the COVID Emergency Lending programme which we introduced in the spring. The six areas in our place-based programme (Local Access) are all broadly seeking to tackle inequality in their places; the extent that this has a particular focus on reaching underserved groups will shape the way data is collected through the programme. Better data is clearly a fundamental necessity in order for us to work with our delivery partners to identify patterns in where investment products are serving the whole community, and understand why it might be the case where they are not.
Our newest blended finance programme will have a particular focus on removing barriers to accessing finance for organisations led by diverse leaders. We have recruited an initial cohort of fund manager applicants into a co-design process and over the next few months we will work with them on how this is best integrated into the design of the programme at a wholesale level.
This is raising some challenging questions for us and the broader social investment sector to address. These include:
- How do we identify specific barriers faced by charities and social enterprises with diverse leadership in accessing finance from the barriers faced more broadly by many organisations, including size, business model, degree of financial literacy, risk appetite etc?
- Since the growth of the BLM movement, much of this discussion has focused on access to finance for BAME led charities and social enterprises. To what extent should this be a particular areas of focus?
- Does a focus on the diversity of the leadership of an organisation sometimes come into tension with diversity of beneficiaries, for example, in places where there may be few organisations led by individuals which reflect the groups who are being served?
- Are these challenges best addressed through seeking to change the cultures and behaviours of existing social investors and/or through developing new interventions? When should these be about the provision of finance and when should they be about capacity building support?
We are glad to be working with some great partners in rich and frank conversations to work through these and other questions.
Investing to achieve equality outcomes
Developing our work in this area has been a more deliberate strategy of Access. Responding to a specific recommendation from the EII report, we have expanded the EDP to have a particular focus on supporting equality organisations to develop earned income and trading models as one of the currently four sectors on which the programme focuses. This work is led by Equally Ours with a range of sub-partners across the equality sector.
So far the programme has exceeded our expectations in terms of levels of interest from frontline organisations, with 38 applicants and 14 successful (37% success rate, average rate for the other three sectors was 44%) both representing higher numbers than imagined for the initial cohort from a cold start. This initial cohort covers a good spread of protected characteristics but so far the weakest area of demand for the programme has been from the BAME led sector. This is particularly disappointing given the disproportionate impact of the pandemic on BAME communities and will be specifically addressed in subsequent applications rounds.
We are excited about the learning which is already being generated from this programme, not least about the range of business models which can support equality impact and how they are best supported.
Diversity and inclusion within social investment
This area of work is championed by the Diversity Forum, now hosted within Social Investment Business. The forum grew from work developed for the first Gathering on Social Investment, held in 2017, and has subsequently been supported by Access via the Connect Fund.
This theme continues with the latest funding round from the Connect Fund inviting proposals which support work that addresses diversity and inclusion in the social investment sector as well as issues of inequality in the social investment market.
Access has worked with the leaders of the Diversity Forum to promote the mission and work of the group to our delivery partners through the Growth Fund and more widely across the sector. We know from our role as observers on a number of the Growth Fund investment committees how they are themselves prioritising addressing diversity in their decision making. We also actively participated in research to inform the Forum’s State of the Sector report including having our team meeting and investment committee observed.
Across all these areas the board will review progress in these areas on a regular basis, and is keen to ensure that this remains aligned to our mission, of understanding and seeking to remove barriers where possible for more organisations in accessing finance, to help them become more resilient and deliver more for the people and communities they serve.