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Friends Provident Foundation triples capital allocation to impact investing

© Shutterstock / iQonceptImpact investment.

Friends Provident Foundation has announced it will more than double its investment in award-winning impact fund Snowball with immediate effect and will invest a further £1m for every £10m Snowball raises.

Friends Provident allocates more capital to impact investment.

Charities are increasingly focusing on the role of impact investing rather than grant-making.

Increasingly impact investment is increasing returns on capital invested.

The announcement from Friends Provident forms part of the foundation’s new strategy, which puts greater focus on its investment activities to better utilise its whole endowment for mission.

This includes impact investing and shareholder and asset manager engagement. The foundation’s allocation to impact investing has increased from 10 to 33% of its endowment.

Investment in Snowball doubled due to proven success

Colin Baines, Investment Engagement Manager, Friends Provident Foundation said: “Making and managing a portfolio of direct impact investments is resource intensive and may not be feasible for many foundations. This common barrier is one of the reasons we became a founding partner in Snowball five years ago. Now it is accessible to smaller investors and has established a successful track record of delivering social, environmental, and financial returns on investment, we are delighted to be supporting it to scale and challenge market incumbents with new best practice.”

What is impact investment?

Impact investment has traditionally had a focus on community investment, where capital is directed to underserved communities or areas, as well as project-based finance aimed at businesses which are serving society’s needs. This latter approach has proved very popular in philanthropic investment.

One of the challenges that impact investing has faced is the market perception that returns are lower than traditional investment approaches – that the fact of ‘doing good’ trumps return. An ESG approach is about improving risk-adjusted return but the return requirements of impact investment have varied by investor: they can range from a straight return of capital to anything from below to above average market returns.

However Danielle Walker-Palmour, director, Friends Provident Foundation said: “A whole endowment approach brings immense mission value. Plus, we estimate our increased allocation to impact investing of 33% of our endowment will result in an estimated income foregone of just 0.46% compared to our existing portfolio. We believe this income foregone, the equivalent of a couple of grants per year, is excellent value for the significant contribution to mission and positive impact.”

Snowball is in top 5% in B Corp for governance of its impact mission

Snowball has been recognised as an important fund-raising platform for NGOs. The fund itself is a diversified, multi-asset class, impact fund of funds, which invests across the interconnected themes of social equity and environmental sustainability.

It has an award-winning impact methodology and is ranked in the top 5% of all B Corporations globally for the governance which protects its impact mission, recently being awarded ‘Best for the World 2022’.

Impact investment strategies focus on companies that have, at their core, a determination to generate social or environmental impact through the products and services they provide.

Laura Boyle, head of shareholder engagement at Snowball said: “By financing these companies, investment managers are helping them to solve the specific challenges that they are working to address. Investment managers have a further role too, ensuring that companies are genuinely delivering against their promises, in a world where impact-washing is pervasive.”

Golden Bottle also doubles investment – charities called on to focus on impact

The foundation is joined by the Golden Bottle Trust, which also announced it is to double its investment in the Snowball fund.  Rennie Hoare, Partner, C. Hoare & Co said: “We use a total portfolio impact approach – where both investments and grants seek to produce an intentional positive impact. 100% of our portfolio is invested for a market-rate-return and positive impact – our increased commitment to Snowball is an important part of this.”

Other investors in the fund include Trust for London, The EIRIS Foundation, The Ian Taylor Family Foundation and City Bridge Trust who form a small but influential group leading the groundswell of charities who are choosing to integrate their investments with their charitable purpose.

Boyle added: “All investment creates impact; market-leading asset owners however are working transparently to ensure this impact is positive, and to deepen it. Together we call on all asset owners to invest positive.”

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