Case study by the Impact Investing Institute: Investing endowments for impact

The Impact Investing Institute conducted a conversational case study on the Bishop Radford Trust and Tribe Impact Capital. This case study explores Tribe’s process of investing the Bishop Radford Trust’s endowment and how we manage it for impact. View the original case study.

Bishop Radford Trust is a charity supporting Christian ministry in the UK and internationally. Working with a range of different charities, it has given out over 550 grants amounting to over £8 million since it was founded in 2006. In 2020, the Trust began working with Tribe Impact Capital to invest a portion of its portfolio for impact. 

Below, Suzannah O’Brien, Managing Director of the Bishop Radford Trust, and Carli Baldasare, Head of Charities at Tribe, discuss creating an impact portfolio for the Trust. 

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When did you start thinking about impact investing for the Bishop Radford Trust? 

Suzannah: The Bishop Radford Trust was set up by my mother in 2006. Originally, it was a smaller-scale, family-run, grant-giving charity. My mother ran most of the operations and there was no outward-facing view of the Trust, such as a website. 

In 2018, my mother asked me to take over the running of the Trust and I felt that I wanted to run the charity slightly differently – including revisiting the investment strategy. Initially, I wanted to explore how we might align our investments more closely with our charitable objectives and to the Church of England mandate through divestment. However, having attended various trainings and through conversations with colleagues, I suggested we go a step further and look at impact investing. 

What was the size of the endowment and who was managing it? 

Suzannah: By 2018 the endowment was about £15mn – today it is around £25mn. At that time, the funds were solely invested with Veritas Investment Management. The family agreed that we would look to create an impact carve-out of £3mn which we would place with an impact investment manager. 

We looked at five different investment firms but did not feel they had the culture or impact investment focus that we were looking for. After conversations with our relationship manager at Veritas, they introduced us to Tribe and we immediately felt they fit with us. They are a friendly team and are unique in terms of their investment offering, in particular we enjoyed their Impact DNA process which helped us to fine tune investment priorities. We began investing with Tribe in 2020.    

What did that Impact DNA process involve? 

Suzannah: The Tribe process is clever and invoked conversations among the trustees which we had not had before regarding the expression of our values as both a family and a charity. As part of the process, we were given a set of 17 cards, designed by Tribe, each with one of the UN Sustainable Development Goals (UN SDGs) on it, including key facts about the goals and the targets which need to be achieved to reach them. Tribe asked us to line up the cards and rank which of the goals were most important to us as individuals and as a charity. This was an interesting exercise for us to undertake and made us think about individual issues and discover what each of us felt was most important. Through that process, we identified four SDGs that were high priority to all of us: SDG 4: Quality Education, SDG 13: Climate Action, SDG 16: Peace, Justice & Strong Institutions, and SDG 12: Responsible Consumption & Production. Following this, there was discussion regarding the more transactional elements of investing such as risk appetite, return expectation, and liquidity needs. Those two sets of inputs formed the building blocks of our impact portfolio with Tribe. 

The UN SDGs clearly play an important role in the Tribe process – why is that?  

Carli: The UN SDGs provide a universally recognised framework for addressing pressing global challenges, such as poverty, inequality, climate change, and sustainable development. Integrating the UN SDGs into Tribe’s investment process allows for a common language when measuring and reporting on progress and impact to our clients. They are the ‘north star’ of our investment framework as they are crucial to how we understand our clients’ values, as well as the investments we choose.  

To identify which UN SDGs resonate with our clients most, we take them through our Impact DNA process. This process was created in collaboration with leading behavioural psychologists and economists. It involves a set of interactive tools, which help us uncover and articulate the impact our clients want their assets to have on the world. The aim is to better understand how their portfolios can further their charitable values and mission alongside meeting their financial requirements. 

The Tribe Impact DNA process helps to show the interconnectedness between all of the SDGs: solving one works to solve others. So, when we build portfolios, we might assign a lead goal for a particular asset but actually, there may be two, three or four other goals that it touches. 

How were the Trust’s priority goals translated into an investable portfolio?  

Carli: We built a diversified, multi-thematic portfolio tailored to the preferences of the Bishop Radford Trust. Through the Impact DNA process, we determined their preference for investments that have broad approaches to doing good. Therefore, their portfolio focuses on multiple overarching sustainability themes, each of which are linked back to the UN SDGs. The Trust’s investment strategy is also complimented by a direct public equity portfolio, which accounts for about 20% of the Trust’s total assets with Tribe. Given the lead UN SDGs identified by the trustees, we integrated investment themes to address social imbalances. This means the impact of their investments targets the essential social outcomes necessary to ensure everyone, everywhere can thrive.  

For example, one of the investments held is a microfinance fund. Microfinance is the provision of financial services to low-income individuals and small businesses that typically do not have access to traditional banking services. By investing in microfinance, we can address financial inclusion, with a particular focus on supporting women as approximately three-quarters of these loans are provided to women.¹ Another example is a company which oversees the reviewing, editing and dissemination of scientific articles to enhance the quality of scientific research output. By providing access to this information, they enable researchers, teachers and doctors to access high-quality, peer-reviewed articles that help them to achieve their missions. 

When we report back to the Trust, we demonstrate how each of their investment holdings aligns with the UN SDGs they have stated are important to their mission. We also provide impact metrics that illustrate the positive environmental and social effects generated by their investments.  

How do you approach SDGs that do not immediately appear to have investable opportunities?

Carli: With SDGs that may not have an obvious investable opportunity, we use an approach which involves recognising the interconnectedness of the goals and the use of indirect avenues for investment impact. A good example of this is UN SDG 16 ‘Peace, Justice & Strong Institutions’. SDG 16 is relatively broad in its range and can be challenging to measure, as it is primarily focused on governmental landscapes. This makes direct investment difficult. However, we see its intersectionality with the other goals. For instance, issues like food scarcity (UN SDG 2: Zero Hunger) or lack of access to clean water (UN SDG 6: Clean Water & Sanitation) often contribute to conflict in society. To target SDG 16, we invest in other goals anchored around people having basic needs. Additionally, Tribe invests in multilateral development banks which have the scale and resources to deliver funding, country-level targets and policies to address these basic essentials.  

Further, an important part of investing on behalf of our clients is actively engaging across our investment universe and the financial landscape. We use our agency for good by undertaking policy advocacy, dialogue with regulators, and collaborating with various international organisations to help create the change that is needed to address issues across the UN SDGs. 

How does Bishop Radford Trust keep track of the impact portfolio’s progress?

Suzannah: We receive a quarterly report that shows clearly how our portfolio has performed financially versus a traditional benchmark, our peer group, and other financial measures. When looking at our holdings, each investment is colour-coded for the impact theme it is investing against, allowing us to identify the type of impact the investment is having – i.e., if it is a more socially-focussed or environmentally-focussed investment. We also receive a report with our impact metrics detailing, for example, how much carbon has been saved over the reporting period, how many net jobs have been created, or how many more people have been provided with access to financial services. In each report, Tribe will also provide a narrative around several of the holdings regarding the impact they are making and why they invest in the company or fund. It goes beyond the typical, traditional financial report.  

We also have a quarterly meeting where we talk through both the impact and investment performance. I read Tribe’s regular updates, provided by Amy Clarke and Fred Kooij [Tribe’s co-CIOs] where they will discuss what is going on both in markets and key sustainability news. When we can, we also go to Tribe’s educational networking evenings, which have focused on topics such as the future of fashion, conservation and education. They are great for meeting like-minded individuals and charity trustees.  

How do you approach responsible investing in the rest of your portfolio?  

Suzannah: In our other portfolio, we have exclusions which mirror what the Church of England has set out in their investment mandate, such as no armaments, no pornography, and no tobacco. Beyond that, the focus is primarily on stewardship where Veritas is looking to push specific agendas such as female equality, board diversity, employee fair pay and environmental issues.  

We do feel that engagement with public companies is another way for endowments like ours to be active in the impact space. Through our voice as shareholders, larger companies can be influenced for positive change and transition. If we do not agree with the progress or direction of travel, then divestment is the next step for us. We have had a few instances where Veritas has engaged with companies and seen a change for the better in strategy and resultant operations. 

Are there any other areas you’re looking to have an impact as an asset owner? 

Suzannah: I think as a funder, you can have influence through different avenues. For example, I am a member of the Church Investors Group, which includes Quakers the Jesuits, the Methodists, the Church of England Pension Fund, the Church of England Commissioners, plus several large charities and foundations. One action we have recently taken, with the help of CCLA [the investment company], is to write to the largest 100 companies in the UK to find out what provisions they have made for the cost-of-living crisis, such as paying the living wage. We define our ‘influence’ differently from our ‘impact’. But both are equally important in the toolkit we use to create positive change. 

Something that has really come through in this conversation is the high level of trust that the Bishop Radford Trust have with Tribe. Are there any other elements that you think have been key to an effective impact investing partnership?  

Carli: Our philosophy and ethos run through the core of our business, we are an impact-led wealth management firm and this encompasses everything we do. We have a shared alignment with our charity and endowment clients as we, too, hold ourselves to high standards to have a material, positive impact on society and the environment. 

Tribe has similar processes, systems, and data as other asset managers in terms of how we measure investment risk and think about asset allocation. Our investment team is fundamental to the core of our business. But our superpower is the addition of our impact team. Their backgrounds stem from science, non-governmental organisations, and philanthropy. This means the questions they ask companies and fund managers when stewarding our impact process are rooted in different types of thinking than a traditional investment manager.  

We have a twin-lens approach to each of our investments. Fred Kooij, our Chief Investment Officer, and Amy Clarke, our Chief Impact Officer, are co-CIOs. The investment team and impact team sit next to each other and each has equal right of veto over the other. This means that even if a security is promising from an investment perspective, if its impact narrative is not strong enough, we will not invest in it and vice versa. Each investment is approved by both teams, resulting in a refined set of investments that have been subject to double the due diligence from an investment and impact perspective. The investments we do not make, and the rationale behind this, are equally as informative and interesting as the ones that we do. Having our twin-lens thinking at the forefront strengthens our partnerships with our clients as it provides clarity and reassurance that our process will ultimately invest their funds in a way that aligns with their charitable objectives and values.  

How has the thinking about impact investing at the Trust changed over four years of working with Tribe? 

Suzannah: We have become comfortable with the concept of impact investing and the team at Tribe has given us more confidence to talk about this space. There is still a lot to learn but we are thoroughly enjoying the process.  

As a charity, we have a relatively low income-generation requirement. As such, we are in quite a strong position to invest in a way that suits our needs and also our charitable mission. I feel having a tranche of impact within our overall investment strategy gives us the opportunity to bring the grant-giving and the investment side of things into alignment. 

The biggest change has been that we have moved away from thinking about the performance of the Trust investments purely in financial performance terms, and now we think about the ‘extra-financial’ terms –  meaning what it is actually achieving in the world. 

What is next for your impact journey? 

Suzannah: We would like to look at social impact funds but we have some work to do in order to gauge the comfort level and the related risk factors. We will also continue to grow our commitment to impact investing. There is no fixed timeframe for this, but this is the direction of travel.  

From my standpoint, I would like to continue to learn more about the investments we are making, so that when I meet other asset owners who are interested in impact, I can talk in-depth about investment opportunities that resonate. It is my job to continue learning in this space so I can be a voice for how impact investing can be done successfully, regardless of the size of the funder. I believe in impact investing – if the charity’s assets can do well financially and deliver positive impact for people and planet, why would you not?