Access must 'urgently ensure its blended finance legacy' – while 'impressive' team is 'stretched', report warns

The Access foundation urgently needs to secure long-term provision of blended finance to the social sector – but some question whether an overly complex social investment market is the best way forward, an independent review found.

Questions have also been asked about the foundation's capacity – with a warning that the small team is "under pressure, stretched and carrying heavy burdens".

Access – the foundation for social investment is a 10-year, spend-down foundation, that provides a mix of grants and loans to charities and social enterprises in the UK which would otherwise struggle to access social investment.

Set up in 2015 with a £60m endowment from the government, and later receiving an additional £40m from dormant bank accounts, Access also runs the Growth Fund, a £46m blended finance programme supporting small scale investment in the social sector (made up of grant funding from the National Lottery Community Fund and loans from Big Society Capital).

The independent review was commissioned by the Oversight Trust, the organisation that oversees the companies that receive and manage funds from dormant assets. The Oversight Trust reported on Access's big brother, Big Society capital, last year. 

This week's report found that Access’s contribution to the development of the social enterprise and charity (CSE) sectors had been considerable thanks to its blended finance model, which enabled smaller organisations in particular to access funding. Through the Growth Fund, Access made more than 500 blended finance investments, representing about 20% of the number of social investment market deals done in 2019. 

“In the absence of Access, the social and economic impact of the CSEs [charities and social enterprises] in receipt of Growth Fund capital would simply not have been delivered,” the report said.

If we aren’t able to resource a successor to the Growth Fund then many organisations will no longer be able to access the finance they need

Grant funding in addition to loans was necessary to balance the “market failure” that would otherwise hinder small social sector organisations, the report said: “In a purely market-driven approach, virtually no financial institutions would routinely make social investments at the small end of the CSE sector” given the higher costs induced by the high number of small transactions, the provision of ‘first loss’ cover and the cost of providing support to individual CSEs.

As the Growth Fund is due to make its final investments by 2022, the report said it was “an urgent task” for Access to secure new long-term subsidy funding to sustain the flow of blended capital beyond this. “If Access closes as planned in 2025, an effective plan and funding is required by 2023 to ensure hard-won learning, experience and trust is not lost,” the report says.

Seb Elsworth, chief executive of Access, said: “If we aren’t able to resource a successor to the Growth Fund then many organisations will no longer be able to access the finance they need, just as the sector emerges from the pandemic.”

He told Pioneers Post that securing grant money to make sure blended finance continued flowing towards CSEs was the “primary issue” right now, and that Access was working with a number of stakeholders to solve it.

Too many layers

While Access enjoyed general support from the CSE sector, interviewed intermediaries and CSEs criticised the complexity and multiple layers within the social investment market, which was “time consuming to navigate and expensive” as a result. Intermediaries also complained about being used as “deliverers of fund management of wholly dictated, inflexible fund mandates, with onerous reporting requirements”. 

Elsworth said: “It is obviously the case that there are a lot of different organisations involved in social investment. But what we see from the evaluation of our programmes, is that while blended finance creates different layers, what charities and social enterprises experience is actually a pretty smooth journey.”

The review said some interviewees questioned the role of Access and whether all the infrastructure organisations added value. In particular, there was some “confusion over the role Access plays, particularly with the Growth Fund,” the report found.

Good cop, bad cop

Questions were also raised as to whether the organisation had any real impact on decision-making when working with BSC and the National Lottery Fund. On the specific relationship between Access and Big Society Capital, the report said some interviewees felt that Access was "dominated by BSC with others feeling that Access is very happy to play the role of ‘good cop’ to BSC’s ‘bad cop’.”

Elsworth said the Growth Fund had a particular governance structure because it was a partnership between Access, Big Society Capital and the National Lottery Community Fund. “We are one of three funding partners in that partnership. And we don't make decisions on our own... if it's a grant agreement between an intermediary and the National Lottery Community Fund, then ultimately that's for them to negotiate.” He pointed out that grants in more recent blended finance programmes had come directly to Access, giving them full autonomy in how to use the funding.



Lack of diversity

The review also found that Access should work to tackle the lack of diversity in the CSE sector. “The social investment sector does not appear at all diverse and has not reached all organisations that could benefit from a truly inclusive mode of operation,” the report states.

Elsworth said Access was taking steps to increase the flow of social investment towards more organisations in black or minoritised communities, in particular through its Connect Fund that funded the Diversity Forum and the Equality Impact Investing projects. Part of its Enterprise Development Programme was also focussed on the equality sector. “We're increasingly integrating this agenda across our core work,” he said, recognising that more needed to be done. “Our historic data isn't isn't as good as it should be... we need to continue to look at our own governance.”

The social investment sector does not appear at all diverse

Team under strain

While Access's sibling, Big Society Capital, is seen by some as having an overly large team, the review panel found that the opposite was true of Access. “Interviewees mentioned a number of times that the Access team is a good team to work with, very impressive, very supportive and not seen within the sector as competitive,” the report said. But it warned that the Access team was under pressure considering all it was trying to deliver: “This small team is currently strained and we heard from a number of internal and external interviewees that all staff members are working under pressure, stretched and carrying heavy burdens.”

This small team is currently strained and... working under pressure, stretched and carrying heavy burdens

The report also highlighted concerns that Access trustees might not realise how much depended on the CEO: “A number of interviewees expressed concern as to whether the trustees are aware of how much is bound up in the founder Chief Executive; feeling there would come a tipping point when it would be too late for him to leave.”

Above: Homebaked Community Bakery, in Liverpool, received funding from Access

Thanks for reading Pioneers Post. As an entrepreneur or investor yourself, you'll know that producing quality work doesn't come free. We rely on our subscribers to sustain our journalism – so if you think it's worth having an independent, specialist media platform that covers social enterprise stories, please consider subscribing. You'll also be buying social: Pioneers Post is a social enterprise itself, reinvesting all our profits into helping you do good business, better.