Agenda item

Report of the Chief Grants Officer.

The Board received a report summarising the activities officers had undertaken since the Social Investment Board’s first meeting held in December 2012. Members were provided with an update on progress in developing a ‘pool’ of social investment advisors. This action was taken forward and a call to submit an expression of interest was sent to thirteen appropriately qualified organisations. By the deadline of 5^thApril 2013, six of these had responded. The list covered a range of both mainstream and social investment organisations, fund managers, advisors and intermediaries, offering a wide range of sector expertise and including experts in both financial risk and risk assessment, with an understanding of impact measurement and who are FSA registered.

The Chairman and Deputy Chairman were due to meet representatives from the three organisations which most closely measure up to the specification; who, if approved, would be included in a ‘pool’ of advisors. Their services would be spot purchased, and matched according as to the suitability of their expertise to the proposal in question. The ‘pool’ would be reviewed from time to time and may be enlarged occasionally, should additional expertise be required.

Members were also provided with an update on the recruitment of co-opted Board Members. Members were informed that following an informal meeting with the Chairmen of the Social Investment Board and the Investment Committee, Town Clerk, Comptroller & City Solicitor and officers, it was decided to defer the search for co-opted members until later in the year, by which time Members would be better positioned to assess which areas of expertise were needed on the Board.

Officers informed the Board that following a Member’s concern that the costs of placing a social investment appear high relative to mainstream market norms (especially for funds of funds where fees are typically 2% - 2.5%) officers had examined the reasons for this and whether there was potential for fees to reduce in the near future. Officers clarified that the social investment market remained a nascent market and did not yet benefit from standardisation of investment deals. In addition, investees incured the costs of additional monitoring and reporting of social benefit which was not commonly required in mainstream investments, and this could result in higher fees.

Members noted that funds of funds, in which investors placed capital into a pool from which onward investments were made into organisations, had helped to tackle both social and mainstream investors’ requirements for scale, risk mitigation and size of investment. The approach allowed for sector or geographic specific focus and provided investors with larger investment opportunities. The effect of this was to increase the reach of social investment to more organisations.

In response to a query from Members, it was stated that over time as more deals were done and replication could follow, fee rates should drop to nearer the mainstream levels of 1.5% - 2%. The City of London Corporation’s participation in the market, and willingness to accept (at this stage) relatively higher fee levels should help in the longer term to lower benchmark fees.

Members were satisfied with the further clarification set out on the role of the Social Investment Trustee.

In response to a query regarding naming rights the Chief Grants Officer reported that there appeared to be no great advantage in being associated with a further fund and it may serve to confuse and be a reputational risk, should this fund take investment decisions contrary to the Corporation’s own best judgement. Whilst this risk could be mitigated by direct engagement with such a fund, this had considerable personnel and resource implications. Furthermore, whilst investment propositions were not yet so plentiful, there was the likelihood of repetition of investments and City of London might be exposed to risk on two counts.

RESOLVED - That the option to consider naming rights be not agreed but remain open, should there be a compelling reason for reconsidering this.