Apologies: Jo Fox (JF)

Transcription

1 Minutes of the meeting of the Board of the Big Society Trust 8:30-10:30am 18 September 2018 In attendance: Dame Clare Tickell (CT) Chair Robin Budenberg (RB) John Kingston (JK) Nicola Pollock (NP) Peter Holbrook (PH) Sir Stuart Etherington (SEt) Stephen Howard (SH) Sir Harvey McGrath (HM) Apologies: Jo Fox (JF) 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) Stephen Muers (SM) BSC Head of Strategy (for Item 4) Anna Shiel (AS) BSC Head of Origination (for Item 5) David Burndred (DB) BSC Chief Financial Officer (for Item 6) ACTION 1 NED only discussion 2 Introduction CT introduced the full meeting welcoming NP to her first BST Board meeting. No additional conflicts were declared. The draft minutes for the June Board meeting were approved. AB confirmed that Matters Arising had been covered. AB to publish agenda and minutes of the last BST meeting on the BSC website. [DONE] 3 Additional Dormant Account Monies Update CP confirmed that BST had received 90 million from the Big Lottery Fund and that BST had made a 10 million grant to Access and had invested 80 million in BSC A shares. There had been a delay in BSC receiving the money caused by the shareholder banks taking some time to sign the document waiving their subscription rights. CP welcomed the additional capital which would be available to fund BSC commitments in the next couple of years. SH asked how the proportion of share ownership of BSC and voting rights would change. CP responded that the 80 million received took the shareholding of BST to roughly two thirds of BSC s shares. It had been the AB provide detail of Subscription Agreement and legal background concerning subscription of BSC shares by BST at par. [DONE] AB to follow-up with RB on basis for BST subscription for BSC shares. 1

2 first instalment of the 135 million commitment (including monies for Access) announced by the Government in January. The final 45 million is expected to be received by BST over the next two - three years. BST will continue to have 80% of the voting rights in BSC. RB queried why the BSC shares had been bought at par rather than at a discount. CP explained that this investment was seen as part of the original 400 million commitment to buy BSC shares at par reflected in the Subscription Agreement. He also mentioned there had been a number of issues that needed to be resolved before the investment could be made meaning opening up a discussion on the share price with the banks could have caused delay and jeopardised the agreement with Government. RB asked that the BST should be made aware of these obstacles and BST needed to be comfortable that it was achieving value for money in making the investment and not benefitting the bank shareholders by over-paying for the shares. AB agreed to share background information including the detail of the relevant clauses of the Subscription Agreement concerning the subscription price with RB, who will report back to the BST Board concerning the issue. [ACTION] AB also pointed out that BST had retained 50,000 of the money from the Big Lottery Fund to cover its operating expenses. Going forward, the way BST funds its operations will need to be addressed. 4 Update on BSC Strategy SM referred to the presentation on Strategy circulated to the Board and commented that the headline is that BSC progress is roughly in line with expectations has involved work on building the pipeline of future investments in the three focus areas and 2019 would be the critical time to assess if targets are being achieved. RB commented on the high proportion of commitments so far this year being in areas that were historically prioritised and what was expected for next year. SM estimated that next year the proportion should be just over 50% with his best estimate of a steady state reducing to 33-40% going forward. SEt highlighted that co-investment is the biggest challenge for BSC as this requires investors with a concessionary view given the level of risk involved. In building the market this could lead to dependence on charitable foundations (including Access) or reliance on lower risk investments such as housing. This could constrain the development of the market. SM agreed that finding more discretionary capital was hard but there were other elements of the market developing, including donor advised funds and retail investors. He agreed that more commercial capital looked for safer investments. 2

3 CP emphasised the tension between investment in models that promoted sustainable social investment and models that capitalised charities and social enterprises. BSC is criticised by both sides. He saw the major opportunity coming from liberating retail funds and pointed to the working group chaired by Elizabeth Corley which is identifying regulatory and advisory barriers to developing more retail products. (For example, products along the lines of fonds solidaire in France where over a million people have invested in funds that blend high impact social investment (up to 10%) with mainstream market investments.) JK pointed to the development of the market over the last years with organisations such as Charity Bank and Venturesome able to demonstrate that risk/return rates for the sector were different to what had been assumed. SH pointed to the challenges to deploying capital he had seen from Power to Change the transition timescale for accepting the programmes and ideas in the sector was taking longer than had been anticipated. CP and SEt concurred that deployment generally was a major issue which was made significantly worse by political uncertainty and the current economic climate. Taking on unsecured loans that depend for repayment on public service contracts is very risky. SM emphasised the need for BSC to be opportunistic and flexible when developing and assessing investments and needing to keep in touch with policy makers (including local commissioners) to ensure social investment continued to be part of the conversation about addressing social issues. PH highlighted the scale of the current level of uncertainty facing the sector and pointed to the potential collapse of house prices (referring to comments by the Governor of the Bank of England in the scenario of a 'no deal Brexit ). There was a discussion of the impact of a fall in house prices on BSC s investments and opportunities resulting from what could be seen as a market correction. CP commented that the Investment Team is in close contact with intermediaries to ensure we can be as helpful as possible to them to stave-off pressures that may arise. PH also referred to the need to keep pressure on commissioners of social services. SH backed this up by referring to the minimal traction achieved by the Social Value Act. CT agreed there was a need to influence the political discourse noting that there are risks associated with current political polarisation and the influence of the populist agenda. There was further discussion around overarching policy themes and current media targets (such as Church of England and BrightHouse). It was pointed out that BSC could add value as a partner on policy issues such as financial inclusion. 5 BSC Investment Themes Communities and Place AS introduced the discussion of the Communities and Place investment strand highlighting the key slides in the Power of Places presentation that had been made to the BSC Board in July, the questions they had been asked to address and the input the BSC Board had provided. 3

4 RB asked about what the strategy meant in practical terms in the context of a particular place, the definition of success and the vision for what is going to happen. AS responded that there was a lot of uncertainty but it should be noted that specific examples such as Bristol would not necessarily be replicable exactly elsewhere and it would be important to respond to local demand and context. This is done by trying to understand critical local issues and who is driving the response (eg mayor) and defining the vision for the area and priority issues. City funds for Bristol have focused on initiatives such as: inclusive employment; community assets; campaigns like No Child Goes Hungry ; or others like sports in left-behind communities. The funding comes from a number of pools of capital ranging from philanthropic to repayable finance, including potentially more complex investment structures. Some enterprise models may require grant as well as investment and BSC is exploring different strands and models that may work, including example from abroad such as regeneration initiatives in the US. SEl outlined how Access intermediaries have supported place-based investments and the development of plans for deployment of the additional 10 million grant from BST for this theme. SH referred to slide 19 concerning Key Questions for approaching engagement and highlighted how difficult it was to get a coalition together in an area and gain traction. Although community housing was an example, he was sceptical about how it would work in practice. Examples were discussed of where political traction was lacking (eg Birmingham) and how solutions proposed from outside (eg Blackpool) have been seen not to work. PH mentioned examples of good practice and potential, and underlined the need for the development of organic growth from grass roots support in an area. SEt saw place-based investment as a very important part of BSC s strategy and pointed to lessons learned from Community Development Programmes in the past. In response to a question regarding the role of community foundations, SEl pointed to Growth Fund investments made in Devon in partnership with a community foundation. JK emphasized that the key was patience and the need to progress organically at the right pace. CT asked about the issue of areas (such as Cumbria or Dorset) with ageing populations. AS acknowledged that the fundamentals and dynamics in areas with growing economies could be very different to those in areas with declining working populations. While this initiative may not be able to address all the issues in different types of places since repayable finance may not be the appropriate tool, the intention would be to develop exemplars of place-based use of social investment in places with different characteristics and challenges. 4

5 6 BSC CEO Update CP referred to the proposed biennial review of the use of money from Dormant Accounts for the Government Inclusive Economy Unit in DCMS. The initiative is expected in 2019 and will not only cover BSC but also the other uses of these monies. While BSC is already overseen by BST, the process of having a further independent review of BSC s structure and mandate could be helpful prior to the new Dormant Account legislation expected in SEt was cautious about Government wanting to use this as an opportunity to emphasise its policy priorities and the on-going work of the Inclusive Economic Partnership agenda. He feared that the review could potentially be used to impose a more restricted range of priorities on BSC. HM said that part of the role of BST was to guard BSC s independence. CP to put CT in contact with relevant people at DCMS concerning independent review of use of Dormant Account monies [CP,CT] Report to BST on BSC Board Away Day on vision and positioning of BSC. [CP Agenda Item Nov BST] It was agreed that CT should have a conversation with DCMS about the review and possibly suggest people who could be approached to be involved. [ACTION: CP & CT] CP outlined progress on the external capital project where a reference group (including BSC Board members) has been established to guide the initiative. There was a discussion of how BSC would be structuring the engagement with the two identified potential counterparties. Issues were raised about ensuring that there was no skew towards allocating BSC s best performing assets and that the shareholding banks were comfortable with the proposal. CP/DB explained that the role of BSC as currently envisaged would be as a sub-adviser. As part of discussions so far BSC had provided an illustration of the types of investment that could go into a new portfolio managed by an established commercial fund manager rather than carving out existing BSC investments. CP also highlighted staff pay pressures and benchmarking exercises that indicated that, for some roles, BSC compensation levels were not competitive. The Board was reminded that senior management compensation is benchmarked against social sector or government pay levels (as appropriate). SEt underlined that it is important that compensation should reflect pay levels in the sector as a whole. There was a discussion of the Stakeholder Survey. RB asked about the response rate and why some stakeholders were not engaging. SH pointed to the need to focus specifically on stakeholders BSC engages with including both successful investees as well as those BSC turns down. PH asked about the decline in perception of BSC making a positive impact and issues around BSC s reputation with charitable foundations. He suggested there could be KPIs reported to the Board and a presentation by the Head of Communications to BST to reflect on the reputational issues around BSC. 5

6 CP noted the new survey was different and more rigorous than the previous one in 2016, however he was concerned about the 51% figure of those who view BSC s impact as being positive. HM suggested that the BSC Away Day would be covering these issues in some detail and there should be a report back from that meeting to the BST Board. [ACTION] The Activity Review and Management Accounts were noted. DB outlined that drawdown had been slower in the first half of 2018 but was likely to pick-up in the second half. 7 Access CEO Report SEl outlined developments for Access including the launch of the Enterprise Development Programme pilots in the youth and homelessness sectors. The programmes represent an evolution in of Access s strategy to better align work with charities and social enterprises toward developing enterprisebased income streams. There are grant and learning elements to the programmes with the object of helping to stimulate trading activity. The Reach Fund has significantly increased its deployment and will continue to be managed by the Social Investment Business. The Impact Management Programme is coming to a close and its legacy will be seen in Inspiring Impact (supported by the Big Lottery Fund). The Connect Fund managed by Barrow Cadbury Trust has been ensuring there is strong co-ordination and an avoidance of duplication from multiple place-based projects. The Growth Fund has invested in 12 funds (with four more in execution) with the 1.2 million not yet allocated, to be invested in those funds that are doing well. 166 underlying investments have been made with an average amount of 66,000 made available to charities and social enterprises with an average turnover of 250,000. He also pointed to the geographic spread of the investments. He outlined the approach to using the 10 million of additional funding recently received for place-based blended finance. Access will be working very closely with BSC on its deployment. He also updated on Access staff changes and Board engagement and Board recruitment. SH commented that he had observed match trading making a real impact on social enterprises. 8 AOB The Board, acting as Members of BST, reappointed KPMG as the company s auditors. 6