Michele Giddens, Partner and co-founder, Bridges Fund Management
Please give us a bit of background on yourself, and how your organisation plays a leadership role in the impact investing space.
I’m a partner and co-founder of Bridges Fund Management, which is a specialist sustainable and impact investor.
My background was originally in international development and microfinance, where I first became interested in using the power of business and investment to tackle pressing social challenges. In the early 2000s I was asked to be an advisor to the Social Investment Taskforce, which had been commissioned by the Treasury. One of its recommendations was the creation of community development venture capital funds to invest in underserved areas of the UK – so Philip Newborough, Sir Ronald Cohen and I co-founded Bridges to meet this need.
We raised £40m for Bridges’ debut fund – £20m came from private investors, and importantly, the Government committed a matching sum as part of its effort to catalyse the market. This fund – which invested solely in SMEs located in the most deprived 25% of areas in the UK (according to the Index of Multiple Deprivation) – was one of the first anywhere in the world to explicitly target social and environmental goals alongside commercial rate financial returns. Its success has since allowed us to raise a further 11 funds: we’ve also pioneered an impact-driven property investment strategy, two new funding models for social enterprises/mission-driven businesses, and the world’s only dedicated fund for investing in social impact bonds. In total we’ve raised over £800m of private capital for impact-driven investment since 2002.
I also chair the UK’s National Advisory Board on Impact Investing, which is bringing together leading practitioners and other interested parties to produce a set of recommendations for Government on how to support the growth of impactful investment in the UK. And I’m a non-executive director at CDC, the UK’s development finance institution.
How well are companies adapting to the mainstreaming of purpose-driven finance?
We meet more and more management teams now who recognise that focusing on purpose doesn’t just protect value; it also creates value by fostering closer ties with employees, suppliers and customers. And they can now tap into a growing number of investors who share that view.
On the flip side, that’s a real opportunity for people like us – because these management teams really want to work with an investor that understands and shares their sense of purpose. For example, we recently bought a business called World of Books, which buys unwanted books and other media (from charity shops and direct from consumers), re-selling those that still have a value and recycling the rest. When we met the firm’s management, they could see we understood the positive environmental impact they were having, and could help them communicate that better to their staff, suppliers and customers. And that was a crucial part of why they chose us as an investor rather than a traditional private equity firm.
We’re also getting collectively better at measuring what matters, i.e. working out what the key impact metrics are that really drive business performance. That’s something we really focus on when we partner with management teams.
What ways is impact investing making headway, and where is it lagging?
This is a really exciting time for purpose-driven finance; it really feels like we’ve reached a tipping point.
We’re seeing more and more institutions from mainstream finance come into this space – which reflects the potential scope of the opportunity and also, importantly, the level of demand from investors. In the past, a lack of investment products – particularly for retail investors – has been a significant constraint on market growth. But with all these new entrants to the market, we’re starting to see a broader range of investment products appear, which over time should increase the amount of capital coming into the space.
Government has played an important catalytic role in the UK in building the necessary market infrastructure (e.g. with the creation of Big Society Capital). But there’s still more it can do – particularly in its capacity as a commissioner and buyer of services. The more it can do to incorporate social value into its procurement decisions (in line with the Social Value Act), the better it will be for impactful organisations. It can also help by supporting ‘pensions with purpose’ and other consumer investment products, and by promoting place-based investing.
One big challenge is that as the market expands, we need to make sure that everyone involved is speaking the same language – otherwise you end up with frustration and mismatched expectations. That’s why we’re part of an industry-wide initiative called the Impact Management Project: its aim is to produce a common framework that helps us to understand, manage and communicate the social and environmental impact of investments in ways that connect an investor’s intention with the change experienced by people and planet.
The other big challenge is trying to do all this at a greater scale. At a generous estimate, the size of the global impact investment industry is about $50bn; whereas the global total amount of capital invested globally is over $100tn. So there’s still a long way to go.