Social investment scheme to link business and local community

Charities Aid Foundation (CAF) and insurance company Legal and General are set to launch a social investment scheme backed by £65k of NESTA funding.

A pilot will be run in Brighton & Hove and if successful will be replicated in cities across the UK, encouraging local companies to invest time and money to support social enterprises.

The model is based on large businesses linking themselves and their employees to local social enterprises. This will involve mentoring, a £10,000 interest-free loan and expert advice for social enterprises.

The goal of the programme is to help social entrepreneurs access a new form of non-banking finance as well as practical support to help them grow towards a sustainable future. It will also engage companies and employees with local communities.

CAF chief executive John Low says: “This model has the potential to fill a funding and support gap for social enterprises that has existed in the UK for too long. I greatly value the partnership that CAF and Legal & General have developed and believe that this model could grow and leverage millions of pounds of social investment across the UK. This would help breathe life into hundreds of local community projects.”

Head of corporate and social responsibility at Legal & General Graham Precey says: “We’re very excited to be part of such a pioneering project. We also hope that by involving employees in mentoring of local social entrepreneurs we will connect local employees with local social enterprises working within these communities as consumers.”

Legal & General employs 2,000 people in Brighton & Hove. Applications from social enterprises interested in taking part in the scheme will be invited in summer 2012.

Social Impact Bond targets NEETs in Shoreditch 

The Private Equity Foundation (PEF) has developed a social impact bond aimed at reducing the number of young people not in education, employment or training (NEET). PEF is investing £450,000 along with £450,000 from Big Society Capital to run an innovative coaching programme called  ThinkForward, in 10 schools in Shoreditch East London, delivered by the charity Tomorrow’s People.

The bond has been commissioned by the department for work and pensions (DWP). If ThinkForward can achieve across eight outcomes over the three year life of the bond, the DWP's Innovation Fund will pay “success premiums”.

Kevin Munday , ThinkForward programme development manager explained that the expected rate of return is around 5% — though it could be as high as 9%. However in the worst case scenario, with no targets being met, PEF and Barclays would lose their original investment and the programme would have to be curtailed.  PEF, as a charitable foundation, will re-invest returns in other charitable initiatives. It has also pledged to run the ThinkForward programme for five years even though the bond is a three-year programme.

Munday says: "There is a risk with any bond. However, we are optimistic that  the programme will be so successful that we will be able roll out the bond to other areas."

The ThinkForward programme identifies 14-year-olds who are at risk of dropping out of school. It assigns them “progression coaches” to provide a personal action plan, workplace mentors and business networks through to the age of 19. This enables them to gather the skills, characteristics and contacts they need to enter the world of work. It is estimated that ThinkForward could save the UK government millions of pounds in the long term by substantially reducing the number of NEETS in Shoreditch alone.

Secretary of State for Work and Pensions Iain Duncan Smith says: "This is a brilliant example of what can be achieved by organisations working on the ground offering an innovative approach to changing lives. It was great to see first hand the difference this is making. I believe this will give young people the skills that will enable them to reach their future goals.”

Law firm Kirkland & Ellis International LLP has worked on a pro bono basis to help develop the bond. Kirkland private funds partner Stephanie Biggs says: “Previously, the government has just written a cheque and not been sure whether it got value. This way, the government only pays for projects that deliver tangible results.”

Kirkland corporate partner David Arnold says: “This project was very similar to what we do in our paid work. It was equally as challenging, and in some respects, more so, as we were dealing with some parties — the UK government and charities — that are not familiar with these fund structures at all. This is a project that could well be a blueprint for the social investment model going forwards .” A similar model was launched to reduce reoffending among Peterborough Prison inmates .

Alongside PEF's social impact bond, Barclays Capital has made a straight philanthropic donation to PEF of £1m and Ernst & Young has given £500,000 and pro-bono support  to run the ThinkForward programme for five years in five other schools in the area.

Foundation invests £450k in social enterprise

Bridges Ventures has agreed an initial £450k investment into Auto22, a social enterprise operating a vocational skills centre and commercially-run car garage. Auto22 offers disadvantaged young people opportunities to gain qualifications, skills and employment in motor mechanics. The investment has been made through Bridges Ventures’ Social Entrepreneurs Fund.

The Fund was launched in 2009. It provides a financing solution that is tailored to the needs of ambitious social enterprises. The fund invests in the form of equity-like capital, which shares in the risks but also the returns of social enterprises. Investments are coupled with hands-on advice and support to help the social enterprises realise their potential.  

 
Auto22 is an initiative of Catch22, the national youth charity, which supported the development of the first garage in Gravesend. Catch22 remains closely involved as the majority shareholder, with Bridges holding the remaining stake following a first round investment.

By linking the vocational skills centre to the commercial garages, Auto22 aims to provide longer-term opportunities for young people with an interest in mechanics, with the possibility of permanent full-time employment. 

The investment will allow Auto22 to replicate its social business model and develop two further sites in the vicinity, forming a ‘cluster’ around the skills centre. Once this is established, Auto22 aims to roll out the model nationally.  

Auto 22 chief executive Richard Mayhew says: “This investment represents another milestone for Auto22 and will consolidate our ability to prepare young people for the workplace through sound training in vocational skills and give the opportunity to practice these skills in a supportive environment that will provide them with a route to employment and further professional development.”

Nikki King sits on the board. She was previously responsible for building up Lex’s corporate sales division and its Isuzu truck franchise, as well as setting up a charity in the vehicle recovery industry.

Executive director at Bridges Ventures Antony Ross says:“We are excited to be working with Catch22 to support such an ambitious social enterprise, and are delighted to have introduced Nikki King to the board.”