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Resonance: matching social enterprise with investment
As interest in social enterprises continues to grow, social impact investment firm Resonance represents an innovative way to connect social organisations with responsible investors.
It aims to match social enterprises with investors who share their values and want to invest in sustainable, well-planned projects. The organisation is currently working with over 10 social enterprises as clients and has three operational impact funds with just under £30m under management. It also works with an extensive network of individual ‘angel’ investors who wish to back social enterprises.
Dan Brewer, managing director of Resonance, explains, “We exist to connect sources of capital with transformational social enterprises, to act as a bridge between them.
“We do this in two complementary ways. Firstly, we have a corporate finance team that can work with individual social impact organisations to help them raise investment. Secondly, we have a fund management team that can create and manage impact investment funds, where these are the right tool to get capital into that situation.”
The Real Lettings Property Fund, which Resonance developed with homelessness charity Broadway, is a food example of this. The fund launched in 2013 with over £16m investment from five founder investors, and recently secured an additional £10m investment from Croydon council. It aims to ease homelessness and provide vulnerable individuals and families with opportunities to rent affordable accommodation and a route back to an independent life.
Brewer adds that the organisation’s work with Broadway began with Resonance helping the charity scope different ways to raise investment. This then developed into a property fund, which has to date secured over 80 one and two-bed flats across London suitable for this purpose, towards its target of 220. It combines the features of a residential property fund with a targeted social impact in homelessness, and is looking to grow to £45m or more this year.
Social impact investment is an area that has seen encouraging signs of growth in the last few years. Research published last year by Triodos Bank found that three million investors could consider social investment this year, and with more than £2 trillion currently invested in standard savings accounts, investments and pensions, even a minor shift could deliver a significant impact.
The government has also shown support for social enterprises and laid out plans to extend tax relief benefits to the sector in a bid to increase investment, which will come into effect from April 1 2014. This growth and interest is something Resonance has been part of since its foundation in 2002 and continues to build on.
Simon Chisholm, investment director at Resonance, says, “We are actively engaged with social organisations and we can stay very close to the emerging demands for capital, which we believe allows us to be more responsive and impactful in the funds we launch.”
In addition to the Real Letting Property Fund, Resonance currently manages two other social impact funds. The first, the Community Share Underwriting Fund, launched in May 2012 with £500,000 in initial investment. It provides asset-backed finance to community groups to support innovative and ambitious community projects in diverse areas, including sustainable energy, community business hubs and community farms. The fund provides ‘underwriting’ to community share offers in the form of interest-only loans.
The second fund, the Affordable Homes Rental Fund, is a community lending vehicle with initial investment from Big Society Capital of £2.5m. Established in August 2012, the fund invests in community-led organisations providing long-term affordable rental housing for local people.
Both these funds grew out of Resonance’s experience working directly with community led initiatives, and are now seeking a second round of investment.
It is hoped that Resonance’s work will encourage pension funds and other institutional investors to consider impact investment, a sector that is currently more often associated with private investors and trusts who wish to invest their capital for impact. It also has an ambition to open this area of investment to allow smaller retail investors to access it more easily. If the market continues to grow successfully, more money could flow into the area, leading to social and environmental benefits for the wider community and returns for investors.
Whilst every fund and individual financing is different, Brewer says, “The common themes are that we always need to see a good combination of transformational social impact, viable business plan and strong management.
“We involve the social enterprises themselves in helping to set the measures for impact, so that these are consistent and reinforce their ‘theory of change’ rather than distorting their incentives. We look wherever possible for commercial risk-adjusted returns, often by seeking innovative ways to reduce risk.”
Further reading:
Croydon council commits £10m to social investment fund that helps the homeless
Report ‘de-risks’ impact investment to open sector up to mainstream
Fiona Woolf: London must lead in social impact investment
Triodos survey says 3m may consider social investment in next year
Government sets out social enterprise in Social Investment Roadmap