@sebelsworth and his team @si_access have 7 years to help charities and social enterprises become more financially sustainable – but how?
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“Actually, it is tremendously liberating.”
Seb Elsworth is talking about his organisation's impending demise. Yes, you read that right. He and his team all know that their employer, Access - the Foundation for Social Investment (Access) will close its doors in seven years' time, and they've known this from day one. That's because it was set up to operate for just a decade, with funding from the government for that period only.
So, why - as the clock ticks down - is Elsworth so cheerful?
“From the organisational perspective, it means we are very focused on what we need to do,” he explains. “There is very little organisational ego, and we are very incentivised to be as open as possible about what we are learning. It also means that there is no chance to kick things into the long grass or be distracted by other things - we've got to be focused on delivering our core mission of making charities and social enterprises in England more financially resilient and self-reliant.”
Unusual circumstances, then, but also highly motivating - there's clearly no time to waste.
Access began life in March 2015. Its mission is to help voluntary organisations, charities and social enterprises access social investment finance that can enable them to become more sustainable.
These organisations may not have had enough support to take on social investment before, or they may not have been offered the types of finance that met their needs. Elsworth and his team, however, are seeking to change all that.
“The brief from our chief donor, the UK government, was to spend down the £60 million endowment that they gave us,” he explains. “While a substantial amount of money, it was deliberately not enough for a permanent endowment. The logic was that it would be a significant period of time to build the evidence base for what works in this kind of support for the sector, so that after the endowment ended others would be able to build on what we had learned.”
Fortunately, they weren't coming into a landscape untouched by social investment. On the contrary, the UK's social investment market is the most advanced in the world, thanks in large part to the work of . At the same time, accessing social investment can be difficult. “If charities or social enterprises were looking for a mortgage or had significant security, then they probably could,” concedes Elsworth. “But working capital in some cases wasn't available, and in other cases it was only available at very high interest rates - so this was the gap in the market that hadn't really been met.”
This meant that there needed to be some form of subsidy. “Evidence was building that to meet the needs of charities and social enterprises looking to borrow smaller amounts for relatively smaller activity, there needed to be something new,” he says. Enter Elsworth and his team.
“When I started almost three years ago, the first year was about designing programmes, going through consultation processes, and so on. The first round of what we used to call investment readiness programmes went live in the early part of 2016. The idea was to pilot some approaches and see what worked best and learn from them quite quickly, with the idea that after two years we would refresh the strategy - which is exactly what we have been doing.”
Today, Access has three main priorities, all of which are set out in its new strategy. “Over the next five years we are committing to spend £40 million of the £60 million - so the majority of the funding will be spent in the middle part of the organisation's life,” Elsworth points out.
“We want to spend the bulk of the money now - rather than wait till the end of the organisation's life - in order to maximise its social impact. And this is on a slightly broader remit than we have been previously doing, in that it is now about developing greater entrepreneurial activity in social enterprises more broadly. The logic being that if we want more organisations to benefit from social investment, then we need to create the environment where they are trading and are more likely to need to borrow.”
Under these plans, Access will firstly be using its endowment to help charities and social enterprises to earn more of their own income and specifically to develop business models that can be further supported by utilising social investment. Secondly, it will be managing and promoting new finance models which bridge the gap between charities and social enterprises on one side and social investors on the other. This is principally done through blended finance approaches, where Access works in partnership with the Big Lottery Fund and Big Society Capital. And thirdly, it will be adapting to the changing investment needs of the sector by building systems which make that knowledge easier to understand and use for the long term.
These new priorities have been tailored to the evolving needs of the social sector, continues Elsworth.
“Ten years ago, many charities would have been very uncomfortable with the idea of taking on a loan - it would have felt far too commercial for them,” he points out. “But the world they are operating in domestically has changed enormously. Austerity has happened and demand is increasing for their services in many cases. So they need to become more enterprising, and more organisations are clear about the role investment can play in helping develop part of their business model.”
To this end, Access is seeking to fulfil a partly educational role, where it can identify and steer charities and social enterprises towards the most effective business models. “Our view is that one of the key areas of information we need to develop is around helping the sector better understand the different business models that are working,” says Elsworth. “We also need to relate this to other sources of income - fundraising, government contracts, and so on.”
Elsworth believes that, to some extent, this is because social investment - despite its increasing prevalence in the UK - is not fully understood by all the relevant stakeholders.
“I've observed that the charity sector can sometimes be a little confused between the uses of capital and the need for revenue - they can sometimes get conflated,” he says. “So we need to be clear that social investment is for the stimulation of activity that can lead to the creation of revenue for organisations - this is key. Government is a big provider of revenue through the contracts it provides and that the sector delivers. And with the particular model of social impact bonds, you draw all these elements together, and it is very appealing for government and can be good for charities as well.”
Much to build on, then, and much still to do. “It's going to be very busy,” says Elsworth, smiling. “We wouldn't have it any other way!”
