22 April, 2020

The view from: Community Impact Partnership (CIP)

Jules Tompkins, Investment Manager, Community Investment Partnership

Established in 2018, CIP is a joint venture with four housing associations set up as a vehicle to enter the social investment market. Social investment is a broad term but in this context is the use of repayable finance to help enterprising and impactful organisations to achieve a social purpose. Often more flexible than grant funding alone, this type of finance can help unlock opportunities for growth, social impact and support growing organisations to achieve a more stable financial position. When the funds are repaid, they can be reinvested and recycled, making the money work harder and go further than a traditional one-time grant.

Social investment is a tool in the funding box. It can be a great enabler and, in some cases, helps to drive changes in the way an organisation may think, plan and deliver services increasing its resilience going forward. But it’s not always the right tool. You wouldn’t use a spoon to change a plug and in a similar vein, sometimes repayable finance is not the right choice. For the four HA partners involved with CIP (Clarion, L&Q, Orbit and Peabody), social investment was a natural next step to keep expanding the tools and resources they have available to invest in communities, build stronger local economies and achieve greater social value from supply chains.

CIP provides an opportunity to support enterprises in a different way, offering an alternative perspective and insight about the role the housing sector can play in helping to sustain, stabilise and grow social enterprises. It aligns strongly with the placemaking focus, supporting local innovation and enterprise, securing different types of investment into a community as well as creating jobs and social impact. CIP is also exploring the role it can play in helping increase the presence of social enterprises within the supply chains. Investing to help increase the capacity and capability of enterprises to deliver quality goods and services whilst also achieving positive social impact. This in turn helps buyers secure greater social value from their contracts and supports a stronger social economy.

Building a pipeline and identifying the right opportunities for social investment takes time. Like most financial transactions, the decision to commit an investment is (in part) driven by the risk-return factor. In grant making the risk-return is about social impact, on the opposite end of the spectrum, mainstream investment is driven by the financial return. Social investment is a mix of the two. We tend to support organisations that present a high-risk profile (often because they are quite early stage, reliant on public sector revenues or have limited resources available to them) but rather than look for a higher financial return, we try to balance the risk against the potential social impact. Yes, we’d like our money back at some point and yes, we charge an interest rate but without the potential for positive social impact we’d be unlikely to take the risk (even if it was lower).

So why am I going on about risk-return and social impact? Well, because in a few short weeks the Coronavirus pandemic has rewritten the rules and the risks. We have no idea how long its impact will truly last or what the world will look like on the other side.

As an investor there is little we can realistically do to manage the impact caused by the inevitable financial crisis and, often more of a challenge, the tension that some organisations will feel between the need to make decisions about how to help their business and the potential downside of a significantly reduced social impact. Like most others, our priority is to help organisations to survive in the first instance and hopefully thrive again in the future. In the short term, we’ve relaxed some of the terms on our existing investments to provide flexibility and breathing space and will keep reviewing this on a rolling basis as the crisis continues. We know social organisations by their very nature will keep focussing on social impact wherever possible, but we don’t expect them to achieve what they originally set out to do right now. As things move forward, we’ll look to follow their lead in terms of the support and resources they might need in future.

We’re also drawing on the other available tools. Access to skills and professional advice is being offered through a series of topic-based webinars, information about emergency resources is on our website and we’ve kept the fund open for new applications. We know taking on a debt is unlikely to be anyone’s first choice in the circumstances, but it is still a tool in the box that could be worth exploring. As a starting point, any social impact organisation considering whether social investment is a potential option should consider –

  1. Does a reasonable percentage of their existing revenue already come from trading or other forms of earned income such as contracts? (around 20% or more)
  2. Are they likely to face a cashflow problem now or in the next 12 months?
  3. Do they have a reasonable idea what their future revenue streams might like look? (even if they can’t offer any certainty at the moment)

If they answer yes to at least two of these questions, social investment is an option they could consider.

Get in touch

To learn more about The Centre for Excellence in Community Investment, contact HACT Network Lead Adam Chester

contact adam