The opening plenary of the UK’s Association of Charitable Foundations’ 2012 conference, held in London on 7 November, was called ‘Financial crisis: responding to the new normal’. Responding to the financial crisis has been centre stage for ACF for the last few years. In 2010, the opening plenary focused on ‘Orientation for foundations in a time of change’ – ‘a time of change’ comprising ongoing recession and expected massive cuts in public spending. The 2011 opening plenary was called ‘View from the bridge’, the aim being to look at ‘how trusts and foundations are responding to the opportunities and challenges of these difficult times’.
So what was different in 2012? The big change was that ACF chief executive David Emerson acknowledged that the economic situation ‘no longer looks like a crisis blip but a new normal’. He went on to outline some of the issues facing foundations confronting the ‘new normal’:
- Foundations with endowments, facing ongoing low levels of investment return, have to decide how much money they are going to spend while ensuring that they can stay around for the long term.
- With many voluntary organizations fragile or close to collapse, do foundations need to support the organizations that deliver their mission rather than projects?
- Do funders need to change what they do? For example, if they have been a social change funder, can they hold that line in the face of overwhelming need?
Few could argue with Emerson’s conclusion that ‘the combination of need and austerity makes it difficult for any of us to succeed in our missions with our previous approaches’. Or with his suggestion that foundations ‘need to make their whole balance sheet work for the mission, including their investments, their shareholding rights, their brand, reputation and convening power, as well as the human and social capital inherent in the organization’.
So what should foundations do? In particular, should they be trying to fill the gaps left by public spending? There was a big focus on social investment in 2010 and 2011 and again this year. But Jo Curry of VONNE (the support body for charities in the north east of England), speaking in the opening plenary, didn’t see it as even part of the answer. In the north-east of England, the region with the highest levels of deprivation and unemployment in the UK, many charities are trying to provide a safety net, she said, but up to a quarter are considering closing in the next year or closing down a service. But the recent emphasis on social finance is ‘depressingly irrelevant to most of the sector,’ according to Curry. The issue is not lack of access to capital but lack of access to income. And there is no likely return on investment because people can’t pay for services.
A breakout session on social investment explored how it can help foundations achieve their mission. Sara Llewellin of Barrow Cadbury Trust described the work of Bristol Together, launched in October 2011 with the aim of creating full-time jobs for ex-offenders through the repair and refurbishment of empty properties. It buys empty properties and contracts with its social enterprise partners to employ ex-offenders in all aspects of the restoration. Once the properties are fully restored they are sold and the original capital, plus any profits, is reinvested back into the business to finance further property purchases and further job creation. Bristol Together’s largest funder is the Esmée Fairbairn Charitable Foundation, and Barrow Cadbury is also an investor. It is currently working with Triodos Bank to raise further funds. What this example suggests, not surprisingly, is that social investment can do different things; it can’t necessarily plug the gaps left by public spending cuts.
Social investment should be expected to increase during a recession. According to Clare Thomas, City Bridge Trust was drawn to try out social investment because the money it had in deposit accounts was getting so little return ‘so we might as well try to do this and get some social return’. Recession has two drivers, said John Kingston: low returns on mainstream investments and the need to do more with resources and make the money go further.
Another way of doing more with resources was put forward by Catherine Howarth of FairPensions, suggesting that, with a lower returns environment likely to continue, foundations can secure the maximum positive value from their investments by being active, engaged and responsible shareholders. She gave the example of six foundation investors that have joined a wider group to promote the living wage among FTSE100 companies. As a result HSBC recently agreed to move 3,000 people onto a living wage.
How do you address an oil company about environmental sustainability issues such as clearing up in the Arctic? Howarth’s advice is not to disinvest but to stay in there nudging companies away from particularly destructive courses.
Summing up at the end of the day, European Foundation Centre chief executive Gerry Salole reminded his audience that foundations always have to make choices with scarce resources. The difference is that today the choices are harder. While continuing to test new ideas and ways to make better use of all available resources, foundations ‘have to cut their cloth’. In continental Europe and the US, he said, people have absorbed the panic and reconciled themselves to the new status quo – the implication being that in the UK foundations haven’t quite got there.
Salole gave the example of a big foundation that more or less went bankrupt. They had a small endowment left. It changed management and the organization committed itself to ensuring that the local population that would have benefited from their support are getting support from other sources. ‘I was blown away with what they’ve now decided to do.’
Foundations need to be less anxious about not having blueprints, he concluded. ‘They manage better without them, adapting, tweaking, it’s an incredible strength.’ Levi Strauss talked of differences in the ways people solve problems between engineers and bricoleurs, who put something together using whatever materials are at hand. Foundations should be the bricoleurs, said Salole.
Caroline Hartnell is editor of Alliance magazine