Apologies Sir Stuart Etherington (SEt) Stephen Howard (SH) Sir Harvey McGrath (HM)

Transcription

1 Minutes of the meeting of the Board of the Big Society Trust 8:30-10:30am 20 February 2018 In attendance: Baroness (Jill) Pitkeathley (JP) Chair Robin Budenberg (RB) John Kingston (JK) Dame Clare Tickell (CT) Peter Holbrook (PH) Jo Fox (JF) Apologies Sir Stuart Etherington (SEt) Stephen Howard (SH) Sir Harvey McGrath (HM) Other attendees Alastair Ballantyne (AB) Company Secretary (from Item 2) Cliff Prior (CP) BSC CEO (from item 2) Seb Elsworth (SEl) Access CEO (from Item 2) David Burndred (DB) BSC Chief Financial Officer (for Items 3-4) Dai Powell (DP) BSC Chair of Nominations and Remuneration Committee (for Item 6) Anna Shiel (AS) BSC Head of Origination (for Items 6-7) ACTION 1 NED only discussion 2 Introduction JP introduced the full meeting. Apologies were noted. The draft minutes for the November Board meeting were approved. No additional Board conflicts were recorded. Matters Arising had been covered. AB to publish agenda and minutes of the last BST meeting on the BSC website - DONE 3 Update on Distribution of further Dormant Account Monies CP welcomed the commitment by Government in January to direct capital from Dormant Account monies to provide BSC with investment of 100 million with an additional 25 million to allow innovative and potentially risky models that break new ground in the market and Access with a 10 million grant. The Government direction to the Big Lottery Fund for the distribution will be complicated by additional funds being made available to youth services ( 90 million) and financial inclusion ( 55 million). BSC s commitments may soon exceed its current capital and a paper is being brought to the BSC Board on how this will be handled. 1

2 JF said the DCMS had received the message about the need for certainty of cash flow for BSC. There was further discussion by the Board of timing, government priorities and mechanisms for the distribution of the other funding for youth organisations and financial inclusion. 4 BSC CEO Update CP referred to the chart showing over 0.75 billion reaching the front line (drawn down plus match) with drawdowns significantly catching-up with commitments across a range of investments, including community energy, community finance, generalist funds, and Bridges SIB fund (which is now fully drawn). This was happening despite the uncertainties for charities and social enterprises in revenues from contracts with government. PH echoed that, despite the sense of uncertainty in the sector concerning public service provision, social enterprises can be characterised by their optimism. Provide background on IRR calculation methodology DB Make available to BST Board (and share with RB) full accounts reconciliation and split of income number - DB CP highlighted two major developments: 1. The arrival of mainstream institutional impact funds (with the five largest institutional fund managers all now having one) and that this is not just a UK phenomenon. BSC was looking at the possibility of raising external capital with the idea that part of the investments in BSC s portfolio could form a small proportion of these impact funds investments. This would raise more capital for social investment, diversify the capital base and could show what good looks like. The BSC Board will further consider findings of the project, and proposed next steps, later in the year. RB highlighted that this approach could allow others to invest in the proven part of BSC s portfolio, leaving BSC with the less attractive investments. CP thought the issues for investors would be less about returns and more about liquidity and risk and particularly looking at the safer-end of the spectrum of BSC s investments. He pointed to the Solidarity Fund model in France as an example with a small social portion of these funds being able to be part of 10 billion of long term savings products. 2. The need to define social investment in relation to impact investment. BSC is working with internal and external partners to define the value, USP and branding of the type of social investment BSC does. He saw depth of impact, long-term commitment for social impact and a social first attitude as key differentiators. Starting with the fundamental USP, the idea is to establish how broad the tent is and to define the differentiating factors, language and positioning. There was an extensive discussion with the Board including concerning the clear blue water between social investment and impact investment. PH asked how BSC could ensure broad support from others in the sector. CP responded that the project team was working with others (including Foundations and SEUK) in the UK and abroad (including the US where the term social investment is used more than is generally realised). 2

3 CT commented that the Big Society moniker might be unhelpful and the issue of BSC and BST s names might need to be considered again, particularly if they are used in a political context, such as around forthcoming elections. CP thought the brand Big Society was less significant than BSC s reputation in the sector for this project, as BSC is a B2B organisation. There was a discussion of the Staff Structure and Banding project. CT commented that the Joseph Rowntree Foundation was not an appropriate comparator. CP outlined the process and reiterated that its conclusions are expected to be relatively modest with no major changes. Financials RB queried how the IRR was calculated for investments. DB explained that a more robust forward looking model has been developed for each investment including its track record to-date and using assumptions and estimation that try to avoid over optimism. RB suggested that it would be useful to have more background for Board members to better understand how the calculation is made. [ACTION DB/AB to organise.] JK asked about capital deployment. CP confirmed that BSC is modelling for when commitments exceed funds available. DB pointed to exits and returns becoming more significant going forward for the modelling work - which is under way. RB asked about the calculation of match and specifically how this worked in the case of investments in banks. DB confirmed that, for bank equity investments, other co-investors investing alongside BSC were counted in the calculation but not increases in deposits. DB presented highlights of the Management Accounts with the year-end valuation process just beginning. The reported loss for the year would be much lower than budget and could be close to breakeven. This reflected valuation movements and Treasury returns being higher than expected. RB commented that the more granular detail presented in the Management Accounts was helpful, however there was an inconsistency in the presentation of the number in the Budget P&L Projected 2017 figure compared with the equivalent figure in the Management Accounts and a reconciliation should have been prepared to explain this. DB explained that this was due to the projected figures were those tabled to the BSC Board in November 2017 whereas the Management Accounts contained the Actual year-end position (pre any valuation changes). A different presentation of Total Revenue (Budget 2017) between the two documents was also noted. RB also thought it was essential that, in the income numbers, investment returns, fund fees and changes to valuations should be presented separately for the accounts to be properly understood. JK commented that, from a transparency perspective, in order to explain the causes of volatility in 3

4 earnings in the future, it could be helpful not to combine the fund fees and returns. JP stated that it was important that the BST Board were given the tools they needed to perform their role properly and asked for a clear reconciliation of the numbers to be made available to the Board and shared with RB. [ACTION DB.] DB described the activities of the Valuation Committee (VC) and the valuation process. The external auditors attend the two major VC meetings each year (in March and September) and the watch list investments are reviewed quarterly by the Committee. 5 Access CEO Update SEl circulated and spoke to a presentation to the Board outlining Access s strategy Access is starting its second chapter and is evolving its capacity building work to have a broader approach to enterprise development. The Theory of Change will focus on greater resilience for charities and social enterprises. Developing sustainable revenue streams from enterprising activities is key to developing resilience and is also a pre-condition of taking on any investment. Access will be learning from its current programmes and listening to the changing needs of the sector. He presented the design principles for the new strategy: 1. There is a shift to the language of trading and enterprise 2. Previously investment readiness programmes have provided aid for consultancy, in future it will be looking to experiment more and encourage learning by doing 3. Communicating through formal and informal structures/ networks 4. Sharing learning about what works 5. Diversifying the models of support There is a menu of possible support including: review of existing data; providing guidance (eg Good Finance); peer support; learning opportunities; peripatetic expertise (including placing interims to change functions); feasibility grants; Enterprise Development grants; and Investment Readiness grants. He reminded the Board that Access has a fixed life and so it is important to make the most of the existing infrastructure to develop an ongoing network of support. Access is trialling this approach in specific impact areas where there is currently significant enterprise activity but potential for more: homelessness and the youth sector. SEl outlined the approach to developing a learning strategy. There will be a new role in the Access team to promote learning and advocacy. 4

5 He also circulated the Dashboard showing performance to 30 September 2017 highlighting that by year-end there were 99 Growth Fund investments and two new funds: one supporting ex-offenders to establish social enterprises and the other supporting a partnership of housing associations operating across the south east of England called the Community Investment Partnership. Two other proposals are coming to the Joint Investment Committee in March. The Growth Fund is now closed to new expressions of interest. There was a discussion with the Board about the growing drive in the sector for contracts, and the need to clarify where the earned income model does not work. JK emphasised that enterprising activities are broader than trading and people need to be flexible and able to combine different approaches including support from Foundations. PH agreed that not everything can be priced and sold and that developing a culture of enterprise was key to this agenda. JK emphasised that Access were not promoting a single approach but encouraging learning by doing. There was a further discussion on legacy and the development of a sustainable infrastructure and the importance of aiming the learning strategy to this end. 6 BSC Nominations and Remuneration Committee Presentation DP outlined the activities of the Noms and Rems Committee. The BSC Board has recently hired three new Directors (subject to FCA approval and ratification at the BSC AGM in June). The individuals are: Paola Bergamaschi Broyd (who has an accounting/investment background), Lesley-Anne Alexander (former CEO of RNIB) and Chris Wright (CEO of Catch 22). [ACTION: AB to circulate memo from HM to JP detailing the recruitment decision.] The issue of the gender pay gap was addressed. This is an issue Kieron Boyle had raised with the Noms and Rems Committee last year. He reported to the Committee that, overall, the data he had been provided with concerning staff grades (excluding Exco) had made pleasing reading. CP commented that BSC often recruits at entry level to train people in social finance roles. We have recently recruited a number of women into the team in this way, and this will mean that the statistics show a higher proportion of women in entry level positions. BSC has established a Diversity Working Group that is also looking at broader diversity issues, including educational background. RB asked about the approach to remuneration of the investment team in the absence of bonuses. CP explained that JR had led development of a process to drive rigour through a culture of trust, honest feedback and learning. He believed that, across the organisation as a whole, the culture is quite extraordinary and powerful. Circulate memo concerning new BSC NEDs to Board - AB AS to respond to any Board member request for information about OKR system. 5

6 AS outlined the quarterly on-line objective tracking process for the investment team (Objectives and Key Results). Further information to be made available to any Directors who would like to know more. [ACTION - AS] RB asked about accountability for write-downs and write-ups. CP referred to the recent risk-assessment presentation to the BSC Board, the possibility of major shifts in elements of the portfolio and the portfolio development activity Keith Starling had spoken about to the BST Board in November. PH commented that some BSC investments had been made for market development and highlighted the importance of BSC s impact report in setting an example of good practice. CT commented that the comparators used for BSC Directors pay were very broadly defined. DP explained that, in practice, it had been agreed to offer Directors 7,000 pa. (plus fees for sitting on Committees) which had subsequently been adjusted in line with inflation. CT asked about the need for more investment management expertise on the BSC Board judging from the Skills Matrix. DP said this would be addressed through the continuing BSC NED recruitment process. 7 Presentation on BSC Homes and Housing Strategy AS presented the first deep dive on the new BSC strategic theme areas. The presentation is forward-looking with the materials presented having been used to help shape the business plan and form part of the investment manual. As housing is a huge area, the key issue has been where best to focus BSC s time and capital for positive change. One option would have been to focus on a single area (such as homelessness) where investments had already been made. However, as the policy environment around housing is too changeable, it would be better to be nimble about picking those areas where conditions are optimal for BSC to make a difference. Slide 15 in the deck shows how BSC will prioritise its co-development pipeline opportunities. The idea is to spend more (scarce) time developing investment solutions for vulnerable people where there are high impact opportunities while being prepared to allocate capital where we can see a path to a wider systemic change such as social property funds. She highlighted two longer term projects: 1. NHF Futures working with the National Housing Federation on an innovation challenge to position for future trends, ground breaking ideas and innovation involving the housing association sector. BSC is the investment partner. 2. Housing for Vulnerable People a package of investment BSC aims to make over 3 years to support innovative housing models for vulnerable people and helping them to replicate and scale. As a first 6

7 stage, Social Finance is helping BSC to map opportunities to use BSC resources including determining future revenues available to support models addressing this area of housing need. CT highlighted the issue of the problem of the term affordable in the context of housing. AS agreed that there was no good definition and the approach was to consider those in housing need. JP underlined the importance of making the link to vulnerability. The connection between housing and employment was discussed and the need to look at fundamentals rather than labels. AS emphasised that part of the strategy was to act as proof of concept of new models. JP suggested that it would be useful to have very specific examples of where social investment works which could be brought to the next investment review by BST. RB said the presentation demonstrated the benefits of BSC having its new, sharper strategy. 8 Board Self-Assessment Process JP is working on contacting all the Board for their input including reviewing skills to be developed. 9 AOB RB agreed to replace CT on the BST Appointment Committee to interview candidates for the role of Social Sector Appointee on the Board. The Resolutions concerning Authorised Signatories were approved by the Board. JP reminded the Board that its next meeting will be at the later time of 11:00am on 7 June