Exclusive: Foundations to invest £15m in Covid recovery fund – but will social investors need rescuing too?

In this first instalment from our exclusive interview with Big Society Capital’s chief investment officer Jeremy Rogers, we explore new backing for the emergency loan fund for charities and social enterprises, and various measures – including mergers – being considered to save social investment intermediaries themselves.

Trusts and foundations are set to grow the UK’s Resilience and Recovery Loan Fund by a further £15m, Pioneers Post has learned.

The new investors are Guy’s and St Thomas’ Charity, the Barrow Cadbury Trust, the Clothworkers’ Foundation, the Joseph Rowntree Foundation, the Trust for London and the Treebeard Trust.

In an interview with Pioneers PostBig Society Capital’s chief investment officer Jeremy Rogers said their backing – expected to include at least one commitment of £5m – was “really quite significant” at a time when endowments were “obviously under quite a lot of pressure”, and signalled a wish to do more than deploy only grant capital to help the sector.

The  RRLF, announced in April, is an emergency loan package for charities and social enterprises who are struggling as a result of the Covid-19 pandemic. The initial £25m in the fund comes from Big Society Capital, with loans administered by Social Investment Business.

Big Society Capital’s money will continue to be deployed first, with finance from the trusts and foundations brought in when needed.

Eighteen RRLF loans totalling £6m have been approved (with 10 disbursed) so far. Deals of £100,000 to £1.5m are currently being approved “every week”, according to Rob Benfield, director of enterprise and development at Social Investment Business – even as demand has been fluctuating as new government programmes and emergency grants arise.

The government’s Bounce Back Loans and Coronavirus Business Interruption Loan Scheme (CBILS) had been more useful than initially expected, Rogers said.

Our big fear at the beginning – and what we were hearing from organisations – was they were being turned down [by banks]. And that's really improved

“Our big fear at the beginning, and what we were hearing from organisations, was they were being turned down [by banks]. And that's really improved, which means the RRLF is really just filling in the gaps.” Changes to the initial rules – including overturning an exclusion on faith-based organisations – have also helped to reach those in need.

Social investors ‘definitely’ in danger

The trusts and foundations backing the RRLF had “moved incredibly quickly” compared to the normal investment process, Rogers said.

But, while most of the focus has been on saving charities and social enterprises, the future of intermediaries themselves was also “a big concern”.

“Our priority here is ensuring we... made the right sort of emergency response for the sector, but you want to look after the organisations who are doing that response, which are the social investors in many cases. They've been, as we all have I guess, incredibly stretched.”

Asked if some were in real danger, Rogers said this was “definitely” the case for some.

“It’s not the majority, by any means. But there are absolutely organisations that, something like this leads to a challenge to their business model in different ways.”

He added: “In our years of operation, it's not unusual for a few intermediaries that we support in different ways to fail each year. So it is likely through [Covid-19] that will be more severe than it has been in the past. We're very, very conscious of that.”

It's not unusual for a few intermediaries we support to fail each year. So it is likely through [Covid-19] that will be more severe

Big Society Capital has enabled social investors to give capital and interest repayment holidays to their investees, and made further investments into some social investors.

It is also working on some more drastic solutions for those facing “increased stress” as a result of Covid-19, said Rogers, including “looking at possibilities such as mergers and joint ventures”.

Asked for further detail on possible mergers and how Big Society Capital was involved, a spokeperson told Pioneers Post that the pandemic was in some cases accelerating existing restructuring plans, and that BSC was encouraging mergers or joint ventures “when it seems the best path to preserve impact”.

BSC has also been speaking to grantmakers, with some foundations “actively looking at supporting social investment intermediaries themselves through the crisis”, according to the spokesperson. This would likely be a blend of grants and loans, potentially alongside investment from BSC.



Risk of error

Several social investors that Pioneers Post spoke to praised Big Society Capital for its speedy response to Covid-19, but Rogers said this was a collective effort and that the group of 15 or so investors which have been meeting (online) weekly since March had been “working as one team”.

“I hope, actually, we're going to bring that sort of mindset to some of the challenges that individual intermediaries might have as well, in terms of coming together and saying, ‘Okay, what are possible solutions here?’”

The trust among the group was also vital in getting the RRLF off the ground quickly – enabling it to be set up within weeks, rather than 3-6 months – with the usual steps being undertaken simultaneously rather than sequentially.

“We were making investments out of there a few weeks before we concluded legals, fees, all the details that you normally do… that was really only possible because of the trust all those organisations placed in each other and in us.”

Rogers acknowledged, however, that working at speed made mistakes more likely. “In some ways, that's okay, it just involves us all taking a bit more risk – but you need to make sure that you're learning and adapting from those mistakes. That's certainly what we've been trying to do.”

Check back soon for more from our interview with Jeremy Rogers.


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