CAF Venturesome Impact Report

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  • 1. CAFVENTURESOMEMultiply your social impact
  • 2. WEARECHARITIESAIDFOUNDATIONWe are a charity dedicated to getting the best for ourdonors and the charities they support.For over 80 years, we have found the most effective andefficient ways to connect our donors to the causes thatmatter to them and for the money to get where it’s needed.Making an impact in the charitable sector is what drives us.That’s why we have spearheaded many of the changes thatmake the UK one of our best giving environments in theworld. We help our donors give over £1m to thousands ofcharities across the world each day.Our award-winning social investment arm, CAF Venturesome,is one of the most established and active players in the socialinvestment market.In the last ten years we have supported more than 360charities and social enterprises with £30m of affordablefinance, enabling them to flourish.© Charities Aid Foundation 2013All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording or otherwise,without the prior written permission of the copyright owner.
  • 3. 3YOURCHANCETOBEAPARTOFSOMETHINGUNIQUESocial investment is an opportunity to support charities in adifferent way, multiplying your social impact, and helping tobuild strong foundations for our social sector.Social investment complements grant-making. We believethat by providing charities with access to capital we can helpthem become more resilient.Supporting our social investment activities means yourmoney will go further. We invest in charities and socialenterprises and when they repay us, we use the same moneyto invest in other organisations. This means our supportersget to assist a wide range of organisations and their impactis multiplied again and again.But it is more than just money. Our work enables charitiesnot just to survive but to thrive and become stronger. Thisstability allows them to focus on delivering their mission.We are at the heart of the groundbreaking social investmentsector. In supporting us, you have the opportunity to be partof something truly transformational.Social investment is the use of money to achieve both  !"#$%&!"!()"*(!(%&!"+,-.+(“I don’t see it as a substitute for making charitable gifts, which Icontinue to make, but as a vital complement to donations andgrants. It’s simply a case of making my money work harder soit can have the greatest impact possible.”Jamie Justham, CAF Venturesome supporter since 2011
  • 4. 4MULTIPLYTHESOCIALIMPACTOFYOURMONEYWe look to maximise social impact in every investmentwe make. In our due diligence we carefully assess thevulnerability of the beneficiaries, the relative scale of theorganisation and its track record in helping its beneficiaries.Supporting CAF Venturesome allows you to...“My support for CAF Venturesome has enabled me tohave a much greater impact than I could have hadwith a one-off donation. ”Paul Spain, CAF Venturesome supporter since 2002£50,000£50,000Traditional PhilanthropyCharity 1Charity 1 Charity 2 Charity 3 Charity 4 Charity 5Social InvestmentSocialInvestmentInvestment / Repayment cycleOne-off donationInvestmentreturnedCAF Venturesome
  • 5. 5BEPARTOFAGROWINGMOVEMENTCharities and social enterprises have long shown that anentrepreneurial spirit and business-like approach can deliverstrong social outcomes. However, the lack of appropriatefunding is a major barrier to delivering on their mission,and the challenging economic environment and strainedpublic sector funding means that many charities and socialenterprises are increasingly seeking capital to:! help them make the transition to a more sustainablebusiness model! bridge to confirmed grants (which are increasinglypaid in arrears)! enable participation in contracts delivering public services! develop assets for use in delivering their activities! manage cashflow effectively through the year.Social investment is growing in the UK and it is set to be a vitalsource of funding for charities and social enterprises, who continueto struggle to access finance from their banks as they may still beperceived as risky investments. However, in the last 10 years, CAFVenturesome, alongside other social investors, has proven that it ispossible to support these organisations.Many large corporates, the government and banks are all turningtheir attention to social investment; the Lord Mayor of London beganchampioning London as a centre of social investment in 2012. It isan exciting time and we expect that social investment will grow to bea major source of funding for charities.This is your chance to help develop a sector that could improve howsome charities and social enterprises access funding, making themmore sustainable and in turn able to create a greater impact.6 out of 10 charities and social enterprises are interested in taking on social investment 11 Big Lottery Fund, Clearly So and New Philanthropy Capital, 2012, Investment Readiness in the UK
  • 6. 61) Social investment: An at-risk contribution which allows charitable funds to be invested in a variety of charities and socialenterprises. Some or all of the funds may be returned as charitable money, which can then only be used for a socialpurpose, either by reinvesting or donating elsewhere in the charitable space. However, all our funds carry some risk andnot all of the investment may be repaid.2) A charitable gift: This is a permanent contribution to the fund which supports the growth of the social investmentcarried out from each fund.You have two options to support CAF Venturesome:CAF Venturesome currently manages four live fundsDevelopment FundHigh-risk capital togenerate social impact bybuilding the capacity ofcharitable organisations£4.3 millonHigh riskUnsecured loans forgrowth and transitionUnderwriting facilitiesand short termunsecured loansHigh-risk unsecuredloans and secureddevelopment loansUnsecured loansfor growth£3.6 millonLow risk£2.1 millonHigh risk£50,000 (pilot)Medium riskCAF SocialImpact FundLow-risk workingcapital for charities andsocial enterprisesCommunity LandTrust FundFor community-ownedaffordable housing.We provide high-riskpre-development anddevelopment financeSE-AssistEnables companiesto provide local socialenterprises withmentoring, consultancyand social investmentto build local socialeconomies capacity ofcharitable organisationsFund size(As 31/12/2012)Loan typesRisk profile
  • 7. Hamelin Trust is a specialist provider of supported accommodation and short breaks tochildren and adults with severe and multiple disabilities. CAF Venturesome provided a£120,000 underwriting facility to support a significant turnaround plan. Central to the planwas the implementation of a new staffing structure, resulting in savings that would securethe organisation’s future. The charity is now making an operational surplus and this year willprovide intensive services for 75 children and 174 adults.Village Water delivers water, sanitation and hygiene programmes to rural villages in Zambia.Diarrhoea is one of the leading causes of infant mortality in Zambia and a contributor tomalnutrition. Village Water approached us when it was forecasting a cashflow deficit assome fundraising income was unconfirmed. We provided a £50,000 standby facility, whichenabled the charity to continue its important work of building wells. Therefore, the charitywas able to provide clean water to 20,000 people in rural Zambia.Lyvennet Community Trust was set up to provide affordable housing for local people.A housing-needs survey identified 23 households in need of affordable housing in the parish. Of these, the majority were young people. We provided £30,000 for the planning for a 20unit-housing scheme and a further £300,000 for the land acquisition. 12 houses are nowavailable at affordable rent or shared ownership in perpetuity. A further 8 plots are being soldfor self-build covered by local occupancy restrictions.Sussex Community Internet Project provides low-cost IT services for charities and socialenterprises in the South East. However, it did not have sufficient capacity to expand itssuccessful services. Therefore, as part of the SE-Assist package, it will receive mentoring fromour corporate partner Legal & General and £5,000 of expert consultancy to help scale itsimpact. It will also receive a £10,000 interest free loan managed by CAF Venturesome forthe necessary investments.Community LandTrust FundSE-Assist7Case studiesDevelopment FundCAF Social Impact Fund
  • 8. 8ANINNOVATIVECOLLABORATIONIn late 2012 the Greater London Authority awardedSt Mungo’s, a leading homelessness housing associationand charity, a contract worth up to £2 million to work withover 400 people who are sleeping rough. The Street Impactproject aims to support people away from sleeping rough,help people get into stable accommodation, help them onthe path to finding employment and to better manage theirhealth.As the contract is on a payments by results basis, St Mungo’swill only be paid once it achieves certain goals. Therefore,the project needed working capital support to help getactivities underway.CAF Venturesome, acting as the lead investor, led thenegotiations with St Mungo’s and arranged the investment.Payments by results contracts do carry a high financial risk,however we are confident in St Mungo’s ability to help theserough sleepers due to its impressive track record and thestrength of its management team. In addition, St Mungo’sitself invested in the scheme, giving it a double incentive toachieve results in supporting people who are sleeping roughoff the streets.With a group of social investors, we invested a total of£650,000 through a Social Impact Bond, which will only berepaid if the expected outcomes are achieved. As we aretaking a high financial risk, we will receive a small financialreturn if everything goes well.
  • 9. 9“We’re doing this because we want to help people rebuild their lives away from the streets. The Social Impact Bond is anew way of working for us but we have been helping people with complicated alcohol, drug, mental or physical healthhistories to get their lives back on track for many years and we know that personalised, long term support is what makesthe difference. This is an opportunity to really make an impact for some of the most disadvantaged people in London.We very much appreciate the support of social investors like CAF Venturesome in this new venture.”Charles Fraser CBE, Chief Executive of St Mungo’sSt Mungo’s is a leading homelessness charity  based in London.  It provides emergency services to people sleeping rough, supports them in their recovery, and works to prevent homelessness.
  • 10. Offered  £30 millionHelped  50 individuals and families  to support social investmentA portfolio of  90­100 clients  at any one timeSupported more than  360 organisations11 years  of expertise10SINCE2002CAFVENTURESOMEHAS...
  • 11. 11HOWTHEFUNDSAREMANAGEDCAF Venturesome’s staff team has experience infinancial services, microfinance, social enterprise andmanagement consultancy. What unites us is a rigorous,analytical mindset for social innovation and the goal ofsupporting social organisations.We carry out due diligence on all our prospective clients andmanage an active portfolio of around 90 organisations. Weare good at asking the right questions, building relationshipsand, ultimately, making sure that the numbers stack up.Responsibility for approving investments is delegated toan external investment committee. This group meetsmonthly and brings years of experience to the approvalprocess – from professional services to venture capital tocharity leadership.As part of the Charities Aid Foundation (CAF) we are ableto call upon expertise from a range of teams. CAF has over80 years of experience in working with charities and socialenterprise, providing financial services, advice and alsorepresenting the needs of donors and the charitable sector.Working together, we can provide a more effective service forour supporters and clients.In 2012 we made 40 investments
  • 12. Community£8.6MDisability£1.8MEducation£2.3MEmployment£3.0MEnvironment£2.7MOther£2.9MHealth£1.7MArts£1.0MChildren and young people£4.2MSector support£1.2M12Our track recordOver the last 10 years we have offered 360 organisationsapproximately £30 million. These facilities range in socialimpact and financial risk, yet our current write off rate isbelow 6%. In addition, our portfolio continues to do well with80% meeting or exceeding the capacity-building targets weput in place at the time of investment.As Figure 1 shows, we continue to invest in a range ofsectors, with more investments in organisations working withyoung people and the community. Part of our objective isalso to educate the market about our work.In the past two years we have published twoimportant papers:1) ‘The Impact Investor’s Handbook - Lessons fromMicrofinance’ to catalyse a robust social investmentmarket, drawing on lessons from 30 years ofmicrofinance.2) ‘Funding Good Outcomes: Using social investment tosupport payment by results’ to ensure charities andcommunity groups are not excluded from paymentby results contracts for public services. We hosted aroundtable event attended by social investors, serviceproviders and policymakers.Figure 1: Since 2002, we have invested in a range of sectors
  • 13. 13THEFUTUREWe are at the forefront of the burgeoning social investmentmarket and by providing intensive feedback at the beginningand throughout our investments we aim to build thecapacity of the organisations that we support.Recent research by Big Society Capital and BostonConsulting Group has shown that the social investmentmarket is growing. Unsecured loans are in high demandby charities and social enterprises, but these are oftenunavailable from high street banks.Therefore, in the next three years we will seek to increaseour social impact by supporting 150 charities and socialenterprises. These organisations will be based in the UK andwill work in a variety of sectors including children and youngpeople, education and international development.
  • 14. 14...improve its services with a loan from the CAF Social Impact FundHELPINGAGECONCERNFORESTOFDEANThe problemWe received a call from Age Concern Forest of Dean (ACFoD)explaining that they had a funding problem. The charity home-delivers hot meals and runs a befriending service for the elderlyin the area. For the last 18 years it had operated from a kitchenwithin a local business but the business was moving and nolonger had space for ACFoD. It had successfully applied for a£98,000 grant to build a new kitchen in new premises but thegrant would be received in arrears, only after the work hadbeen completed.Due diligenceAfterreviewingdetailedinformationaboutthecharity’soperations,wemetthetrusteesandvisitedtheintendedsiteforthekitchen.Weusedthistimetoaskdetailedquestionsaboutactivities,socialimpact,governance,financesandnewkitchenplans.Our solutionAll our loans are structured around the needs of the client.In this case ACFoD expected to received its grant within sixmonths, therefore it required a short term facility. We offeredthe charity a £50,000 short-term bridging facility whichwould be repayable once the grant funds had been received.The outcomeACFoD drew the funds within one month of its approval byour independent investment committee. It enabled ACFoDto start building its new kitchen. The new kitchen facilitieshave allowed the charity to offer a full 7-day service ofmeals, rather than a 5-day one, to more than 100 elderlypeople, improving its social impact.
  • 15. “The loan from CAF Venturesome allowed us to move into our new kitchen facilities with minimal disruption.Without this support we would have had to stop providing hot meals until the work was completed,which would have been very unsettling to the older people we assist who would have struggled to makealternative arrangements.”Daphne Pearson, Chairman of ACFoDYour social investment allowed us to provide  a £50,000 bridging  facility to Age Concern Forest of Dean. This helped the charity  to build a new kitchen and to cook 700 hot meals for elderly people in need every week. 
  • 16. Registered charity number 268369Charities Aid Foundation25 Kings Hill AvenueKings HillWest MallingKent ME19 4TAT: +44 (0)3000 123 028W: www.cafonline.org1294A/0313We are offering you the opportunity to multiply your socialimpact, by supporting CAF Venturesome and our range ofsocial investment funds.There are a variety of options, from investing for a socialreturn to donating to our range of funds to help them grow.Please talk to us to find out more.Support social investmentFor individuals and families:Call: 03000 123 028Email: plannedgiving@cafonline.orgFor grant­making trusts and foundations:Call: 03000 123 300Email: venturesome@cafonline.org.ukFind out more by visiting:www.cafonline.org/supportsocialinvestment