Eleventh generation private banker Alexander Hoare is aiming to move the dial on social investment. He envisages a near future when even the person on the street will be able to commit part of their capital to social good– not because it is a worthy act but because it makes sound financial sense to do so.
Hoare is a convert to the powerful good social investment can deliver, having now committed more than £2m of the bank’s £10m Golden Bottle Trust endowment in a diversified portfolio of debt, equity and venture investment in ‘social-first’ entities. And he believes every portfolio should include such investments that offer small, totally uncorrelated return.
“It’s the small return that really caught my imagination. What I noticed is that while you can make more money on the stock exchange for example, this small return does not get jerked around by central banks, by political referenda, or China expanding and contracting – it’s truly an uncorrelated real return.
“And I think every individual, every family office, every pension fund institution; every insurance institution should want a slice of uncorrelated real return in their portfolio. There’s also a new generation coming who want their money to reflect their values.”
Now Hoare, who has been nominated for The 2017 City Philanthropy Beacon Award sponsored by City Bridge Trust in recognition of his forward-thinking philanthropy, is aiming to make that a reality.
Together with the Panahpur Trust (http://www.panahpur.org/) led by social investment trailblazer James Perry, they have created Project Snowball LLP. Having pooled The Golden Bottle social investments with Panahpur’s they plan to attract other partners who wish to grow a social investment institution, “which may be the first of its kind in the country, or in Europe,” says Hoare.
“When the fund gets to a certain size, around £30m, we will take it to IPO and aim for £100m plus. Then the person on the street can go to the stock exchange and buy a diversified social investment instrument to put in their ISA or their portfolio. It is perpetual capital that will grow and grow – we call it the Berkshire Hathaway of social investment,” says Hoare.
“One thing I have discovered, and it applies to the Golden Bottle Trust, is that these kind of social investments are a bore for institutions to hold. They don’t sit easily in their profit investments and they don’t sit at all in their grant giving, so they are a burden for the finance director. But we will relieve existing investors of those investments and in return give them a fully diversified managed portfolio.”
The fund will be mostly social investments with a percentage committed to social impact bonds, public equity and affordable housing, It will be cause agnostic. “We are not determined by causes, but by things which will make a difference. This is about better education, affordable housing and supporting the disadvantaged. It is social first,” explains Hoare.
“We see scandal after scandal and money being deployed in a not very socially useful manner. We want to get the money where it is having demonstrably good impact. There is lots of money in the city chasing yield and a lot of need for money to do good. We want to be the intermediary,” he explains.
For the last decade Hoare has been leading the Hoare family’s philanthropy which has been at the heart of the private bank since it was established in the 17th century.
The Golden Bottle Trust set up in 1985 has given more than £10m to hundreds of arts, environmental, educational and health charities. It gave more than £1m in 2016 and is expecting to top that this year. Managed by the Hoare trustees its driving principle is to make grants that deliver strategic impact and leverage.
Hoare explains: “You are not going to make a big difference if you give it to the RNLI. But you can make a big difference by choosing strategic causes and funding small charities that can take bigger risks and achieve a bigger bang for their buck.”
“As an unlimited liability bank the partners are used to taking risks together in the business and we are ok to do that in our charitable giving.”
In 2012 the Golden Bottle Trust partnered with the Bulldog Trust, to pilot a new ‘open access’ funding model that turns grant-making on its head. The funding programme let smaller charities and social enterprises identify their own organisations’ needs and apply for funding for them, instead of the traditional donor-led, criteria heavy model. Funding is also made at an early-stage and in-hand with pro bono strategic advice from the business community with the aim of creating transformational change in smaller social impact projects.
So far 51 grants of on average value of £21,000 have been made, with recipients receiving more than 11000 hours of pro bono strategic advice. They have averaged a 90% score against transformational targets.
“We see this is a convincing success and are excited to be developing this model further as The Fore Trust. Through its funding and support provided by the business community, dynamic small charities will be empowered to succeed,” says Hoare.
Philosophy 4Children (P4C), (www.philosophy4children.co.uk/) that encourages enquiry based learning in schools to improve children’s reasoning, social skills, and overall academic performance is another scaling success for the Golden Bottle Trust,
Hoare says: “Believe it or not there is no space on the National curriculum for thinking. We provided some really important early core funding that was matched by Impetus-PEF Foundation to get the prototype programmes going. The project was running in a few disadvantaged boroughs where the results were startling in terms of children’s attainment, particularly among poorer children. We thought why don’t we scale this up, prove the concept and take it nationwide. Hopefully it will be adopted as part of the national curriculum.”
The initiative is now running in thousands of schools and has attracted scale-up funding from The Education Endowment Fund whose own efficacy trials showed that children taking part in P4C made an additional two months’ progress compared to pupils receiving ‘business-as-usual’ classroom teaching in reading and maths.
“And our own bank staff were able to take part in the classroom sessions which is fantastic leverage for our business. Hopefully we will back out as a funder soon,” says Hoare.
Exiting is a real sign of success in strategic philanthropy.
Solar Aid, now called Sunny Money, which provides solar energy to communities in Africa through a micro business model is a Golden Bottle Trust shining success. “We funded it for five years. Now a million homes in Malawi are off-grid and it no longer needs our money. That is exactly what we aim for,” says Hoare.
As well as The Golden Bottle Trust philanthropy, Hoare, like all the bank’s partners, supports causes close to his heart. This includes being a member of the London Committee of The Cornwall Trust raising money from London folk with second homes in the county to address the alarmingly high levels of disadvantage and deprivation there.
“It is fun and worthy. We enjoy getting together for Cornish themed evenings and raising money at the same time. You can enrich both halves of a community by bringing them together in this way,” says Hoare.
Surprisingly, for such a hard-headed philanthropist, ‘fun’ is a key component. “There is a lot of enjoyment and fun in philanthropy in terms of the people you encounter and the difference you make.
“I am particularly proud of the Golden Bottle Trust’s support of Intermission Youth Theatre near the bank’s Knightsbridge branch which takes young people at risk of offending and offenders and turns their lives around by producing exceptional interpretations of Shakespeare. Many of them have gone onto to University or professional acting careers.”
While philanthropy has been important to the Hoare family for more than 300 years, Hoare says we are in a time when it is particularly important and powerful: “The state is clearly groaning and there is an opportunity to find other solutions. Philanthropic capital can be deployed quickly and can take risks that governments and large charities cannot. We can identify opportunities and commit capital fairly swiftly.”
The success of the bank’s Master Charitable Trust donor-advised fund, minimum deposit £250,000, that launched in 2011 indicates a growing appetite among individuals to take on societal challenges.
“We have been really surprised in terms of the number, quality and size of the funds and what people do in them. We have seen a steady trickle of wealthy people come to our door who wouldn’t have otherwise come. They are coming for the philanthropy. We thought our customers would use it for giving, actually it is other people’s customers who are using it for giving and social investment.”
And Hoare is convinced that philanthropy and social investment will continue to grow: “The new generation, the millennials, will see capital as a source for doing good as core.”