As a UK-based foundation looking to use our firepower (capital) more directly for our purpose, the idea of social (or ‘impact’) investment is a natural one for us. Our perspective makes us keen to see more capital able to move into positive social investments, so we are especially interested in investment opportunities that can attract capital at scale.
We were therefore very pleased to invest – along with other UK foundations – in Empower Community, a charity-backed, start-up social enterprise with the mission to accelerate the transition to sustainable low carbon local economies, by bundling portfolios of small energy projects (starting with FIT-backed solar PV for social housing) into portfolios suitable for pension funds. Income from every project is passed back to local community funds to help pay for further initiatives for the benefit of those communities where the project is undertaken.
The first deal was to be (and still could be) a ground-breaking £175m investment by a pension fund based on the Feed-In-Tariff.
The UK government has been strongly encouraging us foundations to engage in social investment – as Francis Maude said, “there are tens of billions of pounds in philanthropic organisations. This should be allowed to be used to generate mixed returns”. The Charity Commission has recently issued excellent new CC14 Investment Guidance to Charitable Trustees to enable more social investment, not least thanks to helpful interventions from the government. The Prime Minister has promised that this government will be the ‘greenest government ever’. We identify closely with the need to protect our planet.
So we were surprised, to say the least, when the government yesterday announced changes to the feed-in-tariff regime, bringing forward a review from the end of March to the 12th December. Without a simple carve-out for social enterprise backed schemes, this effectively scuppers Empower Community.
Panahpur has engaged fully in the emergent field of social investment (as desired by the government) – one such investment being in this innovative scheme to use a government incentive to return excess value to poor communities whilst unlocking capital into green investments.
We understand that there are a number of reasons for the government changing the goalposts on the feed-in-tariff, and that is a debate that we do not wish to comment on. There are strong arguments on both sides.
The point here is that a bigger principle risks becoming collateral damage in this. There is so much more to lose than the small cost of making an accommodation for the few schemes such as Empower Community. Such schemes are robustly parked on the bullseye of so many things that the government is trying to achieve – big society; involving institutional capital-at-scale to engage in social investment; charitable foundations using their balance sheets for their social purpose; greener government; empowering local communities to take action for themselves. They are also relatively small, as yet, in the scheme of things. An exemption for social enterprise schemes taking advantage of the FIT would not cost materially.
It is not too late. The governments consultation period is now underway. I hope that they have the good sense not to undermine so many of their own arguments by allowing such promising green shoots of an emergent social investment industry to be so comprehensively torn up as collateral damage in another debate.