The future of social investment Esmée Fairbairn s Dawn Austwick on the emerging social investment marketplace

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1 Autumn 2011 Generation enterprise How RBS Group s MoneySense is unleashing tomorrow s entrepreneurs The future of social investment Esmée Fairbairn s Dawn Austwick on the emerging social investment marketplace Community loan scheme launched Find out about RBS Group s 5m scheme to support community business

2 Supporting enterprise Chris Sullivan, Chief Executive of the Corporate Banking Division at RBS, believes there are mutual benefits from the emerging world of social investment Contents 03 Supporting enterprise By Chris Sullivan, CEO of the Corporate Banking Division 04 The digest A round up of what we have been doing to make enterprise happen everywhere Contact us duncan.sloan@rbs.co.uk eric.munro@rbs.co.uk is designed and edited for RBS Community Banking by There can be little doubt that the notion of social investment looks set to become part of our industry s psyche. Big Society Capital and Project Merlin have moved this form of investment from the specialist world of funding and philanthropy into the mainstream media, government policy and the national consciousness. Soon, the scale of funding available for social investment is set to increase dramatically, with a potential 600m likely to be administered by Big Society Capital. So, what is social investment and what are the potential consequences for notfor-profit bodies? In this issue of Untold banking, Dawn Austwick, CEO of the innovative Esmée Fairbairn Foundation, explores the potential implications of social investment for organisations tackling some of the most complex issues faced by society (p.20). Community Development Finance Institutions (CDFIs) lend to businesses that find it difficult to access mainstream finance. Ben Hughes, CEO of the Community Development Finance Association, speaks passionately about the key role they can play in creating economic development in the most deprived areas of the UK (p.22). On page 10 we give details of another vehicle to access social investment the RBS Community Business Loan. Flexible, on highly competitive terms and offered to businesses that reinvest profits for a social purpose, this product is available to existing and potential social entrepreneurs. Although important, finance is only one aspect of what a business needs to get off the ground. Business Know How is a support service designed to foster links and knowledge sharing between the private sector and the third sector. Read on page 18 about how this programme has been working in the North East of Scotland over the past three years, delivering impressive results. Finally, on page 13 you can learn more about how our award winning financial education programme MoneySense is now teaching business skills in schools, with an aim to educate the entrepreneurs of the future. RBS has a strong heritage in supporting community-based businesses because we know what s good for communities is good for us too. Our support for social investment, and our commitment to help the sector grow and flourish, is part of that understanding. Chris Sullivan CEO, Corporate Banking Division, RBS Group 08 Face to face RBS Business Development Manager Ian Muir speaks to Harvey Livingston, Finance Manager of Cosgrove Care 10 Banking on change unveils the launch of the new Community Business Loan programme 13 Generation enterprise Unleashing the entrepreneurial spirit in tomorrow s business leaders 18 Business know how investigates a new scheme encouraging collaboration between the charity and private sector 20 Guest column Dawn Austwick, CEO of the Esmée Fairbairn Foundation, on the future of social investment 21 Comments RBS s Simon Watson and Alastair Grier on corporate social responsibility and business innovation 22 Q&A Interview with Ben Hughes, CEO of the Community Development Finance Association Picture: William Parry, Matter&Co 02 / Autumn 2011 Autumn 2011 / 03

3 The digest The digest The digest: a round up of enterprise everywhere Picture: Cois Miah Photography RBS celebrates 10 years of supporting The Prince s Trust This year marks the 10th anniversary of RBS Group s partnership with The Prince s Trust, the charity that works to change the lives of young people who have struggled at school, have been in care, are long-term unemployed or are at risk of offending. In addition to fundraising efforts by staff, the group is the largest corporate supporter of the Enterprise Programme, which provides start-up services and finance to help young people to start their own business. As part of the group s commitment to supporting enterprise, it has extended its partnership with The Prince s Trust by making a further 1m commitment to the Enterprise Programme over the next two years. RBS also sponsors the national and regional RBS Enterprise Awards, to recognise young entrepreneurs that have overcome adversity. Martina Milburn, Chief Executive at The Prince s Trust, said: I would like to say a huge thank you to The Royal Bank of Scotland Group and their employees for all their continued commitment to our work. We look forward to working together over the next couple of years to get even more young lives working. Rapid social enterprise growth in 2011 Social enterprises across the UK reported rapid growth for the second year running, according to the 2011 RBS SE100 Data Report. The report was launched at a special RBS SE100 Awards ceremony held in July at Rich Mix, a social enterprise in east London. Three RBS SE100 champions were announced on the night. After a lot of discussion, research and examination of the facts and figures, the RBS SE100 judges named the Wise Group as this year s Impact Champion, Cool2Care the Growth Champion and Healthy Planet the Trailblazing Newcomer. The RBS SE100 Index was developed by SocialEnterpriselive.com in partnership with RBS to track the performance of social enterprises across the UK. Speaking at the awards, Ian Cowie, Chief Executive, Business & Commercial Banking at RBS, said: Supporting the social enterprise sector is an integral part of our strategy to support enterprises and help them achieve their ambitions. This is a sector that is playing an increasingly important part in the UK economy, and, like any other part of the economy, it is important to gather as much market intelligence as possible. The 2011 RBS SE100 data report highlights: 409 enterprises submitted information with a total annual turnover of 844m 91% is the average growth among the top 100 fastest growers on the index, compared with 79% last year 110,000 is the average profit of those on the index for the most recent trading year 45% of people on leadership teams were women 118 enterprises raised a total investment of 145m from a mix of loans, grants, equity investment, philanthropy, community share issues and lease finance. The average loan was 568,000 and the average grant was 283,000 The full RBS SE100 Data Report can be downloaded at Change matters for the community investment sector The loan portfolios of the UK s Community Development Finance Institutions (CDFIs) increased by 35% to 715m during 2010, according to figures released at a national conference for organisations offering products to financially excluded groups. The conference, hosted by the Community Development Finance Association and supported by RBS, also revealed that a total of 23,000 loans totaling more than 180m were made to individuals and businesses unable to access mainstream finance. RBS is currently investing in a programme designed to increase investment into the sector. The programme, called Change Matters 2, will create a performance framework for the sector enabling CDFIs to put across the case for their lending purpose, supported by data on portfolio performance, business practice, as well as social impact. Speaking at the conference in Liverpool in September, Thom Kenrick, Community Affairs at RBS Group, said: We are committed to making the CDFI sector stronger, sustainable and safer. If the CDFI sector is going to continue to expand to meet demand, they need to be able to access finance from mainstream banks, and to do this they need to become more investible. We re helping to make this happen with Change Matters 2. At the conference Kenrick also unveiled plans for RBS Group s new Community Business Loan programme, which will provide loans to both CDFIs and community businesses. Read more about this on page 10. Find out more about CDFIs in the Q&A interview with Ben Hughes, CEO of the CDFA, on page / Autumn 2011 Autumn 2011 / 05

4 The digest Future financing for historic community buildings The Churches Conservation Trust s Regeneration Taskforce will hold its first ever conference to address the financing for historic building projects. The Regeneration Taskforce works to bring derelict and vandalised churches back to life for community purposes. It draws on the experience of the Community Banking team at RBS, as well as organisations including English Heritage, The Prince s Regeneration Trust, the Rural Communities Commission and the Department for Culture, Media and Sport. Supported and hosted by RBS, the Regeneration Taskforce Conference, Financing the Future of Historic Buildings, will bring together people involved in the maintenance and development of historic churches and community buildings to discuss the new context for funding these projects. Peter Aiers, Head of Regeneration at the Churches Conservation Trust (CCT), said: We re having to deal with new funding scenarios in the current environment. This event is about addressing how we deal with this, and how we secure future sources of finance. Traditionally we had relied heavily on funding from the public purse but now we really need to explore how private funding can be used and maximised. This includes how we maximise private sector partnerships with the likes of RBS, to both achieve our aims and maximise their community return. It s about a two-way relationship. Duncan Sloan, Head of RBS Community Banking and a board member of CCT, said: This is all about returning assets back to the community, which in this case is churches. Flowing on from that our aim is to bring to life again the local communities that will embrace the commercial opportunities presented to them which is what we re all about at Community Banking breathing new life into places and turning opportunities in the community into productive income. For more information visit Getting good deals done Professor Muhammad Yunus, who was awarded the Nobel Peace Prize for his work in developing the Grameen micro finance bank in Bangladesh, will be guest speaker at this year s social investment conference Good Deals, to be held in London in November. Yunus will share a platform with some of the leading figures in the emerging social investment marketplace, including Nick O Donohoe, CEO of Big Society Capital; Bob Thust, Director of corporate responsibility at Deloitte; and Eric Munro, director, Community Banking at RBS. Munro said: We re committed to supporting the development of the social investment marketplace and our Community Banking team has more than 10 years history in supporting social businesses. This is why we re sponsoring Good Deals, which has become one of the leading forums for sharing innovative ideas, developing the sector and connecting investors with entrepreneurs. The conference, which has been supported by RBS for the last four years, is a forum in which mainstream investors, institutional investors, foundations, advisors, policy makers, support networks and social entrepreneurs can learn from, inspire and do business with one another. To find out more about the conference visit Picture: St Pauls Church in Bristol, 06 / Autumn 2011 regenerated for community use J Purcell Autumn 2011 / 07

5 Interview Interview Face to face Ian Muir, Business Development Manager at RBS, pictured right, discusses rapid growth with Cosgrove Care s Finance Manager Harvey Livingston Cosgrove Care is a Glasgow based charity that has been working with people with learning disabilities for half a century. These are difficult times for many organisations, and it s important that we build good relationships between the voluntary sector and financial services. Ian Muir, RBS Ian: Our relationship with Cosgrove Care dates back to October 2004 when the organisation decided to move to a new banking services provider and accepted our offer to be that provider. Harvey: We approached RBS to take over our banking business. One of our directors had good experiences with RBS and through his contacts the two organisations agreed to work together. Cosgrove Care has been providing support services to people with learning disabilities for almost 50 years. When we started working with RBS we were in a period of rapid growth, from being a local organisation supporting a small number of people with learning difficulties in residences, to a multifunctional organisation providing support to a much greater variety of users. We d also opened several charity shops. As a result, the number of staff in the organisation went up to 130. We only had one person in Human Resources, so we needed both additional regular funding, and some back-up expertise in employment legislation and practice. Ian: It s challenging for an organisation to grow so quickly, and RBS was able to support them in that process. More recently, the challenge for Cosgrove as with most organisations has been to deal with the current economic climate and the requirement to continue raising money. There s also the need to recruit volunteers to assist with that fundraising. Cosgrove is trying to avoid reducing its services because of funding cuts. Harvey: We ve had good support from RBS during all this time, and we ve worked with different people there over the years. Both Ian and his predecessor have always been quick to respond to our queries. They re supportive, and sympathetic, and always helpful. Ian: I ve enjoyed getting to know Harvey and learning more about Cosgrove Care and how RBS can help them develop. These are difficult times for many organisations, and it s important that we build good relationships between the voluntary sector and financial services. Having that personal relationship with an organisation means we can really understand and respond to their needs. Harvey: I ve been in business for 28 years, with 12 years in the charity sector. In that time I ve met with many bankers, and I ve encountered a variety of styles and regulations. I believe the most important thing in a relationship with a bank is to have a strong bank manager who fights your corner within the bank s regulations, to enable you to keep your organisation running smoothly, and avoid putting obstacles in your way. Ian: We can provide that kind of service to our clients because every customer has a dedicated relationship manager and a named support team. If an issue crops up for a client, it can be dealt with quickly. I think for Cosgrove, RBS Mentor was a great additional service at a time they needed to cut costs. Their consultant helped with employment law advice on how to reduce staff hours to avoid having to let staff go. Harvey: The contribution made by Mentor has indeed been immeasurable. They are at the end of the phone for advice, have handled several difficult situations with employees over disciplinary matters, and have held our hand throughout a major staff consultation process caused by planned cutbacks in local authority support for our work. Although we do pay a monthly fee for this, the cost of having that expertise on hand is far less than employing an employment law specialist. Ian: Services like Mentor are about relationship building too. It s about providing a package of tailored services to help customers sustain and grow their organisations. What we try to do with clients like Cosgrove is to make their day to day banking easier and help them manage risk and reduce costs, so they have more time to concentrate on running their core business. Harvey: The care sector is going through a very tough time at present. Statutory funding is being cut and we need to find alternative sources of funding from the private sector, the public sector, and charitable trusts and foundations. This puts tremendous pressure on our staff. In future, I would love to see our financial pressures removed, as they re a direct threat to our service users. We have a supported employment training unit which could expand further if external funding becomes available, and we would like to assist families with children who have learning difficulties by providing respite care and holidays for the children. Ian: Cosgrove Care is staffed by dedicated people providing vital services. I hope they are successful in their application for National Lottery funding and other fundraising activities, so they can continue to deliver their much needed community care services. Meanwhile, we at RBS will continue to do our bit to support them. To find out more about RBS Mentor Service visit rbsmentor.co.uk or call / Autumn 2011 Picture: Garry Untold Maclennan banking Autumn 2011 / 09

6 Feature Feature Banking on change A new loan programme has been launched by the RBS Group to provide low cost finance to businesses returning social, as well as financial, returns. investigates Anew loan programme launched by RBS in October this year will provide funds to community businesses that have thus far struggled to access mainstream finance in an attempt to unleash sustainable enterprises that will benefit society. The 5m Community Business Loan programme will provide loans to social enterprises, charities and community businesses that can prove they are both financially sustainable and can deliver benefits to society or the environment. The loans will be offered on highly competitive terms, giving these community businesses every chance of success during the tough economic climate. Peter Ibbetson, small business Chairman at RBS and NatWest, explains that this is part of a move by RBS to encourage growth and stimulate the economy by supporting enterprises. There is a fast growing number of businesses in the UK that are being set up to deliver both financial and social returns to their stakeholders. These businesses include many charities, social enterprises, community interest companies, co-operatives and ethical businesses, and they should be given every opportunity to play a role in the recovery. Supporting the scheme, business and enterprise Minister Mark Prisk said: It is vital to improve the flow of finance from banks to all sectors of the economy. The Government supports any initiative that could help make this happen and I hope this fund will create new opportunities for community businesses to get access to mainstream finance. These enterprises play a key part in the Big Society and the links forged by initiatives like this will help them move forward and grow. The fund will issue loans of between 30,000 and 500,000, and while the focus is on community businesses that have been trading for three years or more, RBS is also eager to hear from individuals, groups of individuals or joint ventures with well developed plans for a start-up. In addition, Community Development Finance Institutions (CDFIs), that act as intermediary lenders to financially excluded groups and individuals, can apply for loans of between 200,000 and 1m. Ibbetson said RBS expects to support about 1,000 businesses through the fund, some directly and some through the CDFIs. The Community Business Loan is managed by the RBSG Micro-Finance Fund which is an independent charity set up in 2000 by the RBS Community Banking team to support potential and existing social entrepreneurs who are unable to access mainstream finance. Duncan Sloan, Head of Community Banking at RBS, said: We already have a strong heritage in supporting community-based businesses, such as social enterprises, charities and co-operatives, as well as business activity that has a positive impact on society. These kinds of organisations are often excluded from mainstream finance because their businesses can seem unconventional. Often they need extra support to get ready for finance. For example, there may be no collateral in the business and they may need more flexibility making payments. The Community Business Loan has been designed to address these issues. According to Sloan, this sector has a historic reluctance to take on debt, however with the amount of grant money in decline, charities and community businesses need to rethink their sources of revenue. A loan can be used to finance business development (see case study) or working capital for growth. Furthermore, with the government s public sector reform plans and the opening up of public sector services, a loan can help to provide organisations with the capital required to compete for these services. Commenting in the last edition of, Head of Policy at the Association of Chief Executives of Voluntary Organisations (Acevo), Ralph Mitchell, said: To seize these opportunities organisations will in many cases need to scale up or need to transition to a new business model. In areas like social care they ll need to transition from big bulk contracts to personal budgets, and in other areas like reducing reoffending or welfare-to-work, the government wants to pay by results which requires big working capital. The Community Business Loan will be overseen by a board of representatives from the sector, including Bernie Morgan, former CEO of the Community Development Finance Association and Andrew Robinson, director at CCLA, the charity and local authority fund manager. At a glance To be eligible for the Community Business Loan, an organisation must be all of the following: A business with clear social or environmental objectives which reinvests profits for a social purpose An established third-sector organisation located and trading in the UK Investment ready in terms of management, governance and financial position If you want to apply send an to commloan@rbs.co.uk, detailing your interest and someone from the team will contact you to discuss your eligibility. For more information visit: or 10 / Autumn 2011 Autumn 2011/11

7 Feature Feature Crisis, Scotland: How loans can fuel growth Scottish charity Crisis, set up in 1996, provides counselling services to more than 2,000 children, teenagers and adults each year. Recently many of these have been returning British soldiers from the conflict in Afghanistan, who require treatment for trauma, as well as training and support to secure a job in civilian life. But last year, despite its much needed and admirable work, the charity s future suddenly looked very uncertain. Funding from the local health board was cancelled and just weeks later, the charity s Chief Executive received news that it would no longer be receiving a grant from a national charity. We really were very concerned if we were going to get through it, says Crisis Chief Executive Jean Cumming. While more and more people were coming from all over Scotland to use our services, we simply had no substantial way to cover the costs of running our services. Crisis had to quickly enhance its Social Enterprise Business services. Mrs Cumming spoke to RBS to explain the situation. To be honest, I wasn t too sure what they would be able to do. We were just a relatively small charity whose income had just been cut, she says. Mrs Cumming was referred to the RBSG Micro-Finance Fund which agreed a loan of 20,000 over two years to enable the organisation to restructure itself as a social enterprise. This meant that rather than depending on charitable grants or government funding, the charity started to negotiate and market their range of training and employee services to a range of new business partners and other third sector organisations. The organisation transformed itself from a traditional charity to a business offering specialist services to corporate clients. But unlike conventional businesses, the profits made from these private contracts were then reinvested back into the organisation, enabling Crisis to continue to provide services to those people who needed them most. We are now in a position to offer counselling services to those on a low income for just 5 per hour who would otherwise have to pay up to 60, she says. We re working with some really vulnerable people including returning veterans. Cumming says the change has made the organisation even stronger. Before it felt like we were always going out with a begging bowl scraping around for handouts here and there, she says. It is much better to run ourselves as a straightforward ethical social business. It means we are much more independent and we can really effectively and confidently get the job done. For more information about Crisis visit Generation enterprise More business skills have been added to RBS and NatWest s MoneySense programme in a bid to unleash the entrepreneurial spirit in tomorrow s business leaders Ahealthy economy depends on healthy businesses, and it s never too early for people to start building the skills they need to run them. That s why RBS and NatWest supports the grassroots development of finance and enterprise skills. With their MoneySense for Schools programme, young people are encouraged to think about the skills they ll need in the world of work and above all, it aims to inspire them. The programme has been running for several years but recently relaunched with a new website, making it even more useful for students and teachers alike. The site includes information on managing your money, understanding credit and debt, planning for their future, as well as a You re in Business section, which focuses specifically on building enterprise skills. You re in Business is full of interactive content which teachers can use in structured lessons, or which students can access on their own. Schools often use the online resources as part of an Enterprise Day, with materials based around Starting a business or Tendering for a contract. The Starting a business theme is new, explains Lorraine Sears, regional MoneySense Manager for NatWest. However, Tendering for a contract was an existing section which continues to be popular with schools. When schools run an Enterprise Day, they do so with the help of a MoneySense staff member, who usually consults with the school in advance and facilitates the day itself. Typically the day will involve splitting pupils into small teams and getting them to work through a simulated exercise: if they re working on the Tendering for a contract theme, they could be seeking to win an imaginary contract to cater for a school prom or other party. They ll start by assigning themselves particular roles, says Sears. Each team of four consists of a project manager, finance manager, catering consultant and marketing executive. They have to come up with a company name, logo, business cards, menus and a letter setting out why their company is best suited to win the tender. 12 / Autumn 2011 Autumn 2011/13

8 Feature Feature Everything is done to make the experience as real as possible. For instance, groups of friends are usually split up, so everyone has to work with people they don t know as well. After all, in a real business environment, you have to be able to work with all sorts of people and not just your own friends, says Sears. The teams spend most of the morning putting their proposal together, and then do short presentations within their own classroom. The winning team from each class around six in total then presents to the whole year, with an eventual winner then selected by judges. Petersfield School in Hampshire recently hosted an Enterprise Day based on the new You re in Business materials, and themed it around catering for a Halloween party. Vanessa Markey, Head of the humanities faculty at the school, is new to the school and hadn t come across MoneySense before, but was impressed by the enthusiasm it generated. We ran it for 240 year 8 students, she says. As it s the autumn, we had them tendering for the contract to deliver a Halloween party, where they had to cater for 100 guests with a budget of 18 a head. With that budget, they had to provide two starters, main courses, and a dessert. But they also had to think about everything else, like decorations and entertainment. Markey was struck by how interested everyone was in defining their roles and working in teams to try and win. They really enjoyed that competitive element, she says. They liked having a defined role and focusing on fulfilling that role well for a whole day. They had to be both imaginative and practical, because this was a real world exercise. I learnt how to work to a deadline and to a budget. I think it was good to learn some new skills Lorna, aged 12 Having attended many Enterprise Days before, Sears has seen the variety of ways that teams work on their briefs, with innovative ideas quickly being picked up by others around the room. Sometimes you ll see a team disappear to the library to look up recipes, and the other teams pick up on that and don t want to get left behind, she says. It really brings out a healthy sense of competition where everyone wants to deliver the best proposal. The secret to the success of Enterprise Day, and of You re in Business overall, is that every participant is constantly learning without necessarily realising it and the skills range from numeracy to time management, business planning, marketing and public speaking. They get so into it, says Sears. They don t even realise how much they re learning. It s such a good way to cover so many different areas, from maths to english, communication, and negotiation. They re drawing on all those areas to put together a complete picture, just as people would in real life. Lorna and Amy, both aged 12, were part of the recent year 8 group at Petersfield School, and both agreed on the usefulness of the day. I learnt how to work to a deadline and to a budget, says Lorna. I think it was good to learn some new skills. Amy was critical of her own team but approved of Enterprise Day as a whole. I learnt how to stick to a budget and to work as a team, she says. Although our teamwork wasn t good, we still managed to plan our party and we came second. It was fun. The year 8 pupils of today aren t far off being the next generation of potential business people, and it s important to foster all these skills now, says Sears. The point of the MoneySense programme is to prepare people to live and work independently, and to understand finances, she says. Some of the young people we work with in schools will undoubtedly become entrepreneurs. We have to encourage and prepare that next generation. Some of them know what they want to do, others don t. We re there to give them tools and skills, inspire them to think it all through, and prepare them for the world of work. 14 / Autumn 2011 Picture: istock, meyes Autumn 2011/15

9 16 / Autumn 2011 Picture: Guilhem Alandry, Autumn Matter&Co 2011/17

10 Feature Feature Picture: The Aberdeen Arts Centre has benefited from Business Know How Business know how RBS has launched a scheme in North East Scotland to encourage collaboration between the charity and private sector Ask any private sector business what their key concerns are, and the answer may include issues like financial sustainability, good leadership and innovation. Ask a third sector organisation the same question, and what will they say? Probably all the same things. The two sectors have much in common, but they haven t always forged close links. Business Know How North East a collaboration between RBS, the Aberdeen and Grampian Chamber of Commerce, and the Aberdeen Council of Voluntary Organisations (ACVO) is working to change that. Business Know How North East launched as a pilot project in September 2008 and has gone from strength to strength ever since. Its purpose is essentially to foster productive links between the third sector and private sector by sharing skills and knowledge. The project is coordinated by Alison Chandler, ACVO s funding and business planning officer, who says that the project is essentially about mutual benefits and fostering sustainability across every sector. It s certainly true that third sector organisations have faced a big shift in recent years, says Chandler. Many have depended on grants historically, and now need to shift to an enterprising approach and work with different types of organisations. It s a big cultural shift. For RBS, supporting Business Know How is an opportunity to encourage good business practices and facilitate knowledge exchange. Many organisations in the third and private sectors face similar challenges, particularly around leadership and financial sustainability in the fast changing economic, social and policy environments, says George Thom, RBS Director of Business Banking for Aberdeen City and Shire. In the past there have been few opportunities for them to work together or exchange experiences and knowledge. So what does the project actually do, and what does everyone get out of it? The main elements are workshops, annual showcase events where lots of organisations get together, a business mentoring scheme and e-bulletins. At the first showcase event there was an even mix of private and voluntary sector delegates, and Chandler says the benefit to private sector organisations is partly just an increased awareness of the sheer diversity and professionalism of the voluntary sector. The scale and range of those organisations can be an eye-opener to the private sector, she says. These organisations work in the arts, heritage, sports, environment and more. The private sector has gained a huge understanding of what s out there and how many opportunities there are for working together. And for some third sector organisations, getting involved with Business Know How North East has already delivered very tangible results. One of them is Aberdeen Arts Centre, which hosts a range of music and arts events and workshops. Its executive manager, Paula Gibson, joined the organisation shortly before Business Know How North East was set up. It was good timing because it meant I could start attending seminars where I met all sorts of useful people, says Gibson. Everyone was keen to help each other. Thanks to the range of seminars and workshops on offer, Gibson was able to build up skills in marketing, business management, time management, leadership, legal issues, HR and communications. It was immensely helpful, she says. One such workshop was led by RBS s George Thom. Impressed with the workshop, Gibson decided to ask Thom to join the board of Aberdeen Arts Centre, which he did. He s been on our board ever since, says Gibson. It s been a huge benefit to us, having his expertise there, and it wouldn t have happened if we hadn t been brought together through the Business Know How events. Another good outcome for the centre was that it was asked to host the Business Know How Showcase event in 2010, which has led to a new successful source of income as a venue hosting conferences and other events. Our hosting of that event was a brilliant success and we ve run more events since then, says Gibson. Last month we had a University of Aberdeen conference. It has become a growing source of income for us, which is great because it helps to put us on a more secure financial footing. Business Know How North East actually engages with around 1,200 voluntary organisations in the area. Some, like Aberdeen Arts Centre, have a small number of paid staff, while others are run on a shoestring. They, too, have been able to tap into networks and find support they would never The private sector otherwise have accessed. Grandparents for has gained a huge Parents, for instance, understanding of what s is a self-help group for out there and how many grandparents who have had opportunities there are to step in to provide full-time care to their grandchildren for working together. for various reasons. A Alison Chandler, ACVO representative of the group attended a Business Know How showcase event which featured a Dragon s Lair, where she was able to ask for advice. On the panel was Anne Iravani, who runs the consultancy Businessplus Scotland. The organisation had no funding and really needed guidance, says Iravani. I thought I could help, and I m on their committee now. It s such a worthwhile organisation, and just by helping them with a business plan and fundraising I can help them become a more sustainable organisation. Business Know How s latest development is a new online portal designed to match third sector organisations with business support organisations. The thinking behind it is that many third sector organisations simply aren t aware of the range of support available in areas such as finance, HR and marketing. So many of these services are very relevant to the third sector, says Chandler. The trouble is that the signposting to them is often written in the kind of language that might put off third sector organisations. What we re doing is making it clearer what s on offer, and providing direct links to encourage a mutually beneficial relationship. For RBS, the portal is another step towards fostering a healthy business sector. Helping third sector organisations access good business support will make those organisations more sustainable and enterprising, so they can play an increasingly important role in the local economy. RBS, as a provider of specialist banking services, has been delighted to be a leader in the development of Business Know How, says Thom. We see this portal as delivering a vital message that the business world has a range of relevant support to offer aspiring organisations in the community. 18 / Autumn 2011 Autumn 2011/19

11 Guest comment Comment Social investment Better than sliced bread or the Emperor s new clothes? Dawn Austwick, CEO of the Esmée Fairbairn Foundation, on new models of financing organisations to deliver social change A midst all this doom and gloom engulfing us, some are prophesying that new approaches to funding social change programmes offer the answer to all our prayers. Social investment is becoming a buzzword in the funding and philanthropy world. But what is it and what really are its prospects? A social investment is where a funder looks to receive a financial return on their funding as well as to achieve social benefit. A high profile example is the Peterborough Prison Social Investment Bond where a number of investors have pooled their money to back the work of voluntary organisations such as the St Giles Trust to reduce re-offending levels amongst those coming out of prison in Peterborough. We at the Esmée Fairbairn Foundation are one of the funders: if the pilot hits its targets we will get our money back plus a small return. If not, we may lose it. Sounds simple and attractive it is, but drill down into the detail and it becomes clear that this is technically complex work, which demands a scale of activity that many local organisations will struggle to fulfil. Many of the problems facing the most disadvantaged in society are long-term and multi-layered which can sit uneasily alongside the metrics social investment and other funding can demand; on the other hand where social investment offers long-term patient capital this could be precisely the sort of support that is needed. 20 / Autumn 2011 Picture: istock, CreativeArchetype Is social investment likely to attract philanthropic funding that would otherwise be given as grants? Perhaps in a small number of cases, but many funders, like us, will be clear that it is horses for courses. We treat our Finance Fund as an additional tool in our armoury rather than a re-placement for grant finance. Indeed, there may be examples where the two approaches are complementary where grant funding may provide a bedrock that can attract investment finance. Furthermore, the scale of funds available for social investment could really increase the overall size of the funding cake. Big Society Capital is likely to receive 400m from dormant accounts and 200m from Project Merlin. At the moment one of the key problems is getting charities and voluntary organisations to the point where they can benefit from this type of investment and one of Big Society Capital s tasks will be to invest in intermediary organisations to help achieve this. By developing the market it also hopes to bring in commercial capital from mainstream investors and banks. At the moment, these are few and far between with a reliance on a small band of high net worth individuals and foundations. So, on balance, a positive and exciting approach with some way to go in development terms, but charities will have to be canny to benefit from it and may have to look to different ways of working collaborating, former strategic alliances, or even merging, in order to benefit from it. Good for society, good for business? New age in San Francisco Bay By Simon Watson, Head of Community Affairs, RBS Group Sustainability By Alastair Grier, Chief Operating Officer, Business & Commercial Banking, RBS Big business has a trust problem, and RBS is certainly no stranger to this. Polling data from the Edelman Trust Barometer shows that the level of public trust in big business has been declining for a number of years and shows no signs of bucking that trend anytime soon. The reason for this seems to boil down to the fact that people consider the goals of big business to be at odds with the interests of the communities they operate in. Corporate Social Responsibility (CSR) and the wider sustainability agenda have grown in importance over the last decade but have generally remained on the periphery of the corporate schema. Important, but not core is probably a realistic summation within most major firms. I often talk about CSR as a range of activities that fall into three brackets: Philanthropic: when firms identify the issues their staff or customers care about and fall in behind them with financial support to help. This can improve employee and customer relations and provide a brand-bump if the activity has a public profile. Pragmatic: big business is often publicly held to account for problems that happen as an indirect result of activity they engage in. Many businesses focus on addressing these externalities by working with NGOs or community partners to understand or solve the problem. Strategic: the sweet spot of CSR comes when businesses manage to engage in activities that are positive for shareholders whilst also being positive in addressing a societal or environmental challenge. A simple example of this would be the innovations that have enabled a sizeable market for sales of hybrid cars. Many companies will have a rich mix of activity across the three areas, although Strategic is almost certainly the lightest area of activity for most firms. As the discussion on the role of business in society deepens we can expect more businesses to try to identify activity that generates income through products or services that tackle a societal or environmental challenge. The starkest statement of such intent comes from Chairman and CEO of GE, Jeff Immelt, who said: We are going to solve tough customer and global problems and make money doing it. Underneath this succinct statement is a notion that is gaining traction in many companies; namely that there is real opportunity in helping countries, communities and individuals remove the barriers that prevent them achieving their social and economic goals. The Silicon Valley in California is undoubtedly the epicentre of the high-tech industry in the USA and almost certainly the world. But having recently returned from a study trip to the valley I am not convinced that its economic driver status has anything to do with the shiny products, superhuman websites or clever gadgets that flow out of these sunny climes so freely and easily. The trip was organised by a UK network called Wavelength. Its aim is to bring together business leaders and social innovators from across sectors to inspire learning about the role of business in changing the world for the better. Our group visited a handful of America s most successful and pioneering companies, including Google, EA, IDEO and Zappos. While differing in scale, fortune and fame, all these companies had achieved enormous success through technological excellence. But behind this excellence, our group quickly came to realise, was a ceaseless commitment to creating a culture in which innovation is genuinely rewarded and encouraged. Of equal importance was the need to find the best people the most talented, brightest, but also those with the right cultural fit. It would be all too easy to dismiss all this talk of culture as a fluffy, new age digression from the need to get down to some hard business. But I would say that it is the culture not the processes, systems, or funky offices of these companies that lie at the heart of their success. Our group was struck by these companies attitudes to failure. In short, people were judged, not by their mistakes, but by how they learned from their mistakes. This cultural characteristic encouraged people to take risks and innovate. Indeed, one business leader I spoke to explained how a trail of 10 start up failures on a CV would not be considered a sign of failure. Rather, it would be considered more as a rite of passage. On our return to the UK, we were all struck by the realisation that we faced stiff competition. Indeed, if we were 21 years old, we would be considering packing our suitcases to seek fun, fame and fortune in San Francisco Bay. My job now is to ensure that the brilliant opportunities that exist at RBS all encourage and reward innovation, and are undertaken by the best people anywhere in the cosmos. Autumn 2011/21

12 Q&A Q&A Q&A With Ben Hughes, CEO of the Community Development Finance Association (CDFA), the trade association for organisations investing in deprived areas and marginalised communities RBS has long recognised the potential to create wealth and opportunity in deprived areas by investing in Community Development Finance Institutions (CDFIs). Earlier this year, RBS Group Sustainability unveiled a support package to help the CDFA develop industry standards What role can CDFIs play in the economy? CDFIs are key drivers of micro-economic development and are capable of creating lasting wealth in some of the most deprived communities across the UK. Through their ability and commitment to lend to individuals, small business and social enterprises that are unbankable and/or poorly served by current financial services, their reach is potentially vast as we see the emergence of untapped markets. They are the only source of capital, and offer the only business support function in these underserved markets, which are frequently the source of talent, creativity and entrepreneurial zeal that is the bedrock of a thriving national economy. What are the biggest challenges for CDFIs at the moment? As with many others, CDFIs are having to adapt very quickly to an operating environment where there is less money and less revenue in particular yet more need. This generic challenge is compounded for CDFIs given their uniqueness there simply aren t others operating in this market. They are having to develop business models that cover costs of their unique investment readiness work, central to creating a flourishing social investment market. It s not that CDFIs aren t commercially viable quite the contrary in fact, they are working with tight margins, in a highly efficient and increasingly sustainable way it s just that they are about re-investing money locally, within the communities they serve. How can these challenges be overcome? We need a compelling narrative to win hearts and minds and that speaks of the unique social and financial impact that CDFIs can have. The community finance sector needs to move onto the policy front foot, to drive home the message that the scale of need is vast, and that CDFIs are the only providers within this market. This has to be heard by politicians, private investors and public bodies alike, to achieve the scale of support and investment able to meet real need. What role can banks play in alleviating these problems? We need comprehensive and effective partnerships with all banks that can generate the revenue to cover CDFIs costs and that can crucially expand the community finance market. This is the route to improving the financial offer to the growing group of individuals and SMEs deemed unbankable. RBS continues to be a key partner in supporting the sector, and in innovating new collaborative arrangements suited to growing both the sector and the market. Has the potential of CDFIs in the UK been realised? No way! We estimate that only about 10% of need is expressed as demand at the door of the CDFI. Translating the other 90%, and securing the blended capital necessary to meet that demand is the major challenge for the sector as it moves into its second decade. The other challenge for CDFIs is to see themselves as central to local economic growth and that they are ideally placed to forge the type of local partnerships that can drive such growth. What will the Coalition Government s Big Society Capital offer the sector? A lot, we hope! Certainly CDFIs are key intermediaries for delivering BSC s objectives, including growing and sustaining a new asset class. We are delighted that they recognise the role of CDFIs in SME lending, opening up the small and business start-up markets to BSC. Of course only time will tell, and much will depend on the terms on which the capital is made available, but we are determined to see the community finance sector both benefit from this sizeable investment, as well as helping shape aspects of its delivery. For further information about the CDFA visit 22 / Autumn 2011 Picture: William Parry, Autumn Matter&Co 2011/23