Underwriting – what is it, why bother and do we need it?Posted July 21, 2016 by Ignite
In its simplest form underwriting is a loan to your project, ahead of the project raising the finance required, on the promise that if the finance is not raised, the underwriter will commit their monies to the project on the pre-agreed terms.
Sometimes this can be for the full amount of monies to be raised, or sometimes in part.
One of the weaker aspects of community energy projects is the time it takes to raise the community finance – this is called ‘time risk.’ ‘Time risk’ because fundamentals could change in this period, and alter the direction of the project.
Ahead of this window of raising the monies, which typically might last from one month to six months, there has already been long hours of hard work put in to the project. All of this hard work is at risk of being undone if the money is not raised, as the project will not be able to proceed. In addition to this, there is time risk associated with the stakeholders in the project, or the main contractor.
The stakeholder might be in full agreement with the project at the outset, but if there is a failure to raise the monies in the time provided, they might choose an alternative path.
Having a committed underwriter to a project also buys you time. Community energy has shown over the past 12 months that policy changes can happen overnight. Very short timeframes to qualify for a tariff, and periods of uncertainty whilst policy changes are being finalised, can stop a project in its tracks. If the underwriter is already on board with the ethos and general outcomes of the project, and still likely to see a positive outcome for the project, whether reduced in size, or with slightly different legal agreements, then the period of uncertainty will pass without affecting the project.
At the time of the share or bond raise having a committed underwriter to the project should be seen as a sign of strength for potential investors. It means that the project managers have already taken an investor, often of a professional nature, through the economic model, the social impact benefits and worst-case scenarios for the particular project. It also means that if the stakeholder is a local authority who has brought into the community energy model, over a commercial model (who normally has finance upfront) they know that the project is going to go ahead, whether the initial finance raise achieves its’ target or not. This is of particular importance if solar PV is being put on residential roofs. There is no point in engaging with tenants and promising them a reduction in their electricity bills, if after six or nine months the installation never arrives.
So what is the downside?
Funnily enough choosing the right underwriter for your project is key. If it is the wrong underwriter then you might spend a colossal amount of time getting them to understand your project, model, finances and wider aims, and then be hit with high fees for the service, whether it is through arrangement fees, or interest rates on the loans. There is nothing more frustrating for project managers to educate and up skill an underwriter on every aspect of your project, for them to then set an unrealistic lending fee.
Some investors might choose to invest in another project, because it is not underwritten, and therefore might not go ahead, if it does not reach the target.
Whilst every project should be judged on its merits, this approach should not be taken. The project with the underwriting starts off on a stronger footing, as the fundamentals have already been examined, and passed. Energise Barnsley secured the largest amount of underwriting to date for a community energy project – £2 million. The facility was made possible by Ignite Social Enterprise – an impact investment fund with a focus on energy. The facility was not initially granted for Barnsley, and it was not intended to be refinanced by a bond offer.
Through thorough understanding of the project, and core mission of the applicant, Ignite was flexible enough in their approach to be able to keep the same technology and social impacts, whilst changing the regional entity and the nature of the community raise from shares to bonds.
In addition to this, by having the committed underwriting the contractor to the project was able to take ‘at risk’ work in the knowledge that finance was in place. This included conducting EPC certificates on school buildings in order to pre-register them with OFGEM for a community tariff in the two-week period left open by swift policy changes. The solar PV equipment could also be pre-ordered to arrive in time for Q4 2016 installs. None of this could have happened without the underwriting, and half of the Energise Barnsley project would not have gone ahead – the 321 residential installs.
We (Energise Barnsley) would recommend the additional hours it takes to underwrite a community energy project. With the right underwriter on board it reduces time, policy and reputational risk for the project. And in some cases, it provides you the lifejacket you require, if radical policy changes attempt to kibosh your project stone dead. Finally, it removes the stress associated with community raises – the three months or so of will we, won’t we get the monies.
The E-Car Club voucher schemePosted June 17, 2016 by Ignite
Guest blog by Patrick Cresswell, E-Car Club
Since launching back in 2011, providing reliable, affordable community transport has been at the heart of E-Car Club’s operations. As well as strategically deploying vehicles into deprived areas of the UK (lifting the local community out of transport poverty), E-Car also supports local charities that operate within a close proximity of its hubs by offering discounted or free usage for qualifying organisations.
The E-Car voucher scheme sets to support local charities on both an ad hoc and regular basis, providing transport for those who require a vehicle but don’t necessarily have the means to fund their own business travel. Previous usage of the fleet for social benefit has included: providing personal transport to residents (for things like hospital appointments and job interviews), delivering & collecting food from food banks, and the movement of goods between warehouses and shops for several community initiatives and charity shops.
To date, the most advanced E-Car Voucher Scheme is the e-Wheels project based in rural Warwickshire. In 2015, E-Car partnered with Big60Million, a community benefit energy company, to help volunteers expand on an eco-friendly transport scheme to bring mobility support to residents in need. Big60Million provided funding for 200 driving hours, which E-Car offered at a discounted rate (as well as providing 50 free hours), enabling a sustainable, regular social benefit to the local community. e-Wheels has assisted young carers to have some relaxation away from the pressures of caring for disabled siblings or parents, young families on low incomes to get to hospital appointments, isolated elderly to get to the surgery or collect prescriptions, the potentially homeless to reach vital appointments with housing officials, single mothers to take their babies to nursery care sessions.
One passenger, for example, is registered blind. To go shopping in his local supermarket requires a four hour journey and several bus changes. e-Wheels transported him to the supermarket in a matter of minutes; it is just 21/2 miles from his home.
Bob Sherman, Chairman of the Harbury Energy Initiative and e-Wheels Co-Ordinator commented:
“Trips have been made possible that otherwise would not have been. Electric cars must be better for reducing carbon emissions as well as providing a clean and friendly service for vulnerable folks who struggle with everyday common issues of getting from A to B. I can’t praise the volunteers enough for all they have done. Society too often excludes these folks from getting anything good to look forward to but the availability of transport is a major plus factor for each of them. e-Wheels has been a lifeline.”
Harbury food bank run
Please watch this short video for more information.
Other examples of the scheme can be found in a range of other E-Car locations such as Northamptonshire and East London, whereby E-Car is providing a number of driving hours per month for charities to take advantage of their local fleet. For example, local homeless charity, Emmaus, uses E-Car to move stock between their branches, as well as getting volunteers to and from work.
Global Action Plan Catalyst Programme Attends Sustainability Day at Centrica’s Head OfficePosted May 4, 2016 by Ignite
Guest blog by Tom Woolnough, from the Global Action Plan Catalyst Programme. Global Action Plan received investment from Ignite Social Enterprises in 2014.
One of the great aspects of the [Global Action Plan] Catalyst programme is the variety of exposure you can obtain. It’s one of the reasons I applied for the role in the first place. One day you may be walking the wards of Bart’s Hospital to discuss how taking action to improve energy efficiency can improve patient experience. The next you may be visiting an up and coming social enterprise to understand how it operates. Or it could be like the day last week we spent at one of the world’s largest energy company’s headquarters in Windsor.
I was relatively apprehensive about our visit to Centrica. I’m more of a community minded individual, that’s where I enjoy seeing change happen. What kind of insight into this could I gain from visiting this very modern, polished building shining in the English countryside?
It turns out, quite a lot. We spoke to the people of Centrica and heard from various sectors of the business. Matt [Eastland], the corporate social responsibility (CSR) manager, provided some shocking but interesting facts about the probable future of the world. He explained that CSR is integral in not only meeting the sustainable development goals but that also having a socially and environmentally responsible company ensures its own future prosperity. We also heard from Debbie [Miller] about Centrica as a multi-national business and learned how customer focused the organisation is.
Aman [Jasdhoal] discussed with us the vast range of social enterprises that Ignite, the UK’s first impact investment fund with a focus on energy which is backed by Centrica, invests in and supports. They range from “bio-bean Ltd”, recycling waste coffee ground into advanced biofuels to “63000Homes Limited”, designing and manufacturing modular homes for the social housing shortage.
Then it was our turn to demonstrate what we do. We took to the office floor at the request of Jennine [Battrick] from facilities management to examine waste issues on the site. We identified a particular concern arising from contamination of recycling as a result of disposable cup use. Within an hour and a half we’d designed a behaviour change campaign to encourage staff to use reusable “keep cups” which breakeven with disposable cups on natural resources input at 15 uses. We presented the campaign including a “Waste week” which would draw attention to the issues and use behaviour change techniques to ensure a more efficient and sustainable workplace. I for one was impressed with how far our team of Catalysts had come in the last 7 months from having very limited behaviour change knowledge to energetically presenting a campaign to various members of Ignite and Centrica.
It was refreshing to see that an organisation such as Centrica is made of people from all walks of life with many different interests. Individuals and companies are now equally as responsible taking action to create a world with economic opportunities, social progress and environmental sustainability. This not only fills me with hope of a more sustainable world but also it’s exciting to think about the range of options that as Catalysts we are presented with and where our futures might lead.
Home & Garden De-cluttering Service in Suffolk Receives SupportPosted August 21, 2015 by Ignite
Press release from The Eastern Enterprise Hub
The Eastern Enterprise Hub is delighted that one of its Fellows, Olive Quinton of Lofty Heights, has been chosen as one of nine UK social enterprises to receive support from Centrica’s Ignite fund.
The support includes mentoring, business courses and expert support from Centrica employees, helping businesses to develop their strategy and to grow the positive benefits they deliver to their communities.
Digby Chacksfield, CEO at the Eastern Enterprise Hub said:
“Since taking part in our SSE East Fellowship Programme back in 2012, Olive has continued to work incredibly hard to make Lofty Heights an effective and resilient social enterprise. Olive’s team is made up of a group of fantastic young men, who care very deeply about the work they are doing. We couldn’t be happier that they have been chosen to receive this additional support from Centrica’s Ignite fund.”
Lofty Heights is an inspiring business founded by Olive Quinton that provides loft, house and garden de-cluttering services to the general public and to vulnerable people through local health and social care services, social housing providers and local charities.
To undertake this work, Olive employs local young people not in education, employment or training and provides them with a steady income, transferable skills, qualifications and increasing amounts of responsibility, building up their confidence and future employability.
Olive’s mentor from Centrica, Annette Hardcastle, said:
“The work that Olive is doing through Lofty Heights is truly inspiring. I feel privileged to be working with Olive to progress and develop her business, which has grown from strength to strength over the last 3 years.”
Lofty Heights is about to celebrate its third birthday and Ignite hopes that this local social business will keep growing for many years to come.
The nine enterprises from around the UK are the latest for consideration under Centrica’s Ignite investment fund, which is providing capabilities and funding of £10 million over 10 years for energy-related enterprises with a strong social impact.
Ignite’s Investment Principal Sam Salisbury said:
“Social entrepreneurs have a strong sense of purpose. Their entrepreneurial spirit, flexibility and resilience to challenge, are all traits to learn from.”
The activities of the nine companies range from helping communities develop small-scale wind installations to offering online bill management services for low-income households. They will be pitching for investment from Ignite over the next six months.
Our investments: creating financial return and growing social enterprisesPosted July 17, 2015 by Ignite
We are delighted to announce that E-Car Club, Ignite’s second investee, received an investment in July 2015 from Europcar Lab, the Europcar Group unit dedicated to innovation.
E-Car Club is the UK’s first entirely electric pay per-use car club. E-Car Club’s mission is to “improve mobility on a local level whilst reducing both the cost and environmental impact of each journey taken”. The company establishes and manages electric car fleets for clients such as local authorities, housing associations and universities that are available for community use outside of office hours. The club currently operates 63 electric vehicles in locations around the UK.
E-Car Club was founded in 2011 by Chris Morris and Andrew Wordsworth, both experienced entrepreneurs. The company grew with early stage funding from CrowdCube in 2013. Ignite’s investment of £500,000 in early 2014 saw us working together with E-Car Club to grow the team and scale its operations beyond London.
It was not all about financial investment. We supported E-Car Club by defining and quantifying the social impact of the initiative, providing a non-executive director with experience in public sector projects to provide strategic advice to the company, and seconded a British Gas employee who helped to develop sales and customer insight capabilities.
Ignite will remain a shareholder, helping E-Car Club to maintain its social mission. We look forward to working with Europcar to help E-Car Club accelerate its deployment of electric vehicle car clubs throughout the UK.
At Ignite, we are proud not only to have made a financial return, but also, that we have successfully convinced Europcar to preserve the social mission of E-Car Club. The future of E-Car Club is bright, with increased environmental, social and commercial value.
For more information, please see:
The Ignite fund helps entrepreneurs to articulate, measure and maximise their impactPosted February 3, 2015 by Ignite
Guest blog from Alice Chapple, Impact Value
The Ignite fund has been working with some awesome social entrepreneurs and helping them to articulate, measure and maximise their impact. These entrepreneurs often have a very clear idea of how they are bringing positive change to people’s lives and they want to explore how the Ignite investment can help them grow their enterprise and reach more people.
Through my company Impact Value, I have been lucky enough to be working with the Ignite Fund since its early days, supporting Julia, Mandy, Sam, Amanda and all the rest of the great Ignite team.
My particular area of focus is on helping the social entrepreneurs to describe the logical flow from their enterprise’s activities through to the ultimate impact and identify any gaps. The diagram below shows how this ‘route to impact’ fits together.
The following steps help to think this through.
(1) What is the problem that the social enterprise is seeking to address – the challenge?
(2) What are the overall objectives of the social enterprise – the impact? Who are the beneficiaries of the enterprise and how will their lives change if the enterprise succeeds?
(3) What are the concrete tasks and actions the social enterprise is undertaking – the activities – to try to address the challenge?
(4) What are the direct and measurable outputs (products and services) from these activities?
(5) What outcomes will happen as a result of the social enterprise producing these outputs?
(6) What are the conditions for success and what additional activities would help the enterprise to meet these conditions?
(7) How do these outcomes result in the impacts that you are seeking to achieve?
The diagram below shows how this works in a simple example for an enterprise providing training to prevent ex-offenders from re-offending.
We have supported several social entrepreneurs in the process of articulating their route to impact. They tell us that they have valued this opportunity to step back from their business and look systematically at their range of activities and at the assumptions they are making about how they will achieve their objectives. They feel that articulating their route to impact will enable them to be more deliberate about their activities, help them to question and test any assumptions, and identify ways to measure outputs, outcomes and impacts.
The route to impact discussions can also highlight specific questions for individual enterprises. For example, we have talked to social entrepreneurs in businesses seeking Ignite funding about –
- additional activities that might increase the impact of the jobs that the business creates, perhaps by employing people who have not previously been employed
- activities that might enable a car club (set up as a community interest company) to enhance access for disadvantaged groups
- activities or partnerships that might help Brackenburn, one of the companies which has received Ignite funding, to teach school-children about biodiversity, low carbon and fuel poverty through showing them how it harvests, processes and sells its biomass products
- and, importantly, ways in which the social enterprises can incorporate these aspects into a commercially viable operation.
The social entrepreneurs that are engaging with the Ignite fund are an inspiring group of people, working incredibly hard to find solutions to challenges facing society. If this process of defining the route to impact can help them to achieve their objectives, then it adds value for the enterprises, for the Ignite fund and for society as a whole.
Impact Value is a specialist consultancy firm. Our aim is to help businesses, social enterprises, NGOs and investors to define their activities in terms of the contribution they are making to a better society and environment, and to help them to increase that contribution wherever possible. Find out more at www.impact-value.com
Writing a strong social enterprise business planPosted November 28, 2014 by Ignite
The Ignite team reviews business plans from many different types of companies, all of which have two things in common – they are generating commercial revenues and they have an integral social mission driving their activities. A social enterprise business plan needs to be equally clear on both fronts to attract social impact investment. After a year of reviewing business plans, I have a few tips.
State your social mission – What is the problem or issue you are trying to solve and what steps will your organisation take to fix it? Who are you hoping to help? How do you know this intervention will help them? How will you be able to measure your impact? Remember, measurement should be easy – tracking the number of customers, occasional surveying of beneficiaries – and it should help you make better business decisions.
Demonstrate a clear revenue model with target customers – Quite simply, how do you make money? What does your enterprise actually do and who pays you for the resulting service or product? How will you find these customers and how will you convince them to purchase your service or product? That brings us to the next point…
Highlight your USP (unique selling point) – What makes you unique to your customers? What makes you unique to an investor – what is it that means you will succeed? For a social enterprise, this should reflect both your ability to win customers and your ability to fulfil your social purpose. Why should I invest in your community energy project instead of the one on the other side of the country?
Explain how you would use investment – Why do you need investment now and how will you use it? What will it enable? Impact investors like to see that their investment is growing the business and growing the impact.
Mandy Williams, Ignite Investment Manager
SBT/EY Foundation Event – Unlocking potentialPosted October 27, 2014 by Ignite
This week I was lucky enough to participate in a fantastic event organised by the Social Business Trust in partnership with the EY Foundation, Unlocking potential: The role of employers, including social enterprises, in the development of young people’s skills. The event brought together a range of experts from the charity, business, and social enterprise sectors, to explore the role of employers in the development of young people’s skills.
After openers from EY and the Social Business Trust, Dermot Finch, from the Prince’s Trust, set the scene on youth unemployment. There has been much talk this year of the lost generation of one million unemployed 16-24 year olds. With economic recovery this figure is improving, and today, the challenge is to support youth employment in a recovering economy, and ensure that recovery is felt equally across Britain.
In this context, Dermot talked about the importance of the Prince’s Trust’s work engaging with employers to deliver training and work experience programmes to young unemployed people, helping them develop the skills necessary for the workplace. Many of these programmes have been driven by the Movement to Work collaboration, and as a founding partner of the Movement, British Gas has been piloting work experience and training programmes for young unemployed people around some of our contact centres through 2014. Building on the success of these pilots we now plan to deliver Customer Service and employability training programmes to 450 young unemployed people by the end of 2015, in support of the Movement to Work programme. We’ve received significant interest in our pilots, with Nick Clegg recognising the Cardiff team’s efforts on a recent visit to one of our pilot programme groups
I then represented British Gas in a panel discussion around alternatives to university, exploring employment opportunities for young people who want to get a job straight from school. This was a real opportunity for me to reflect on the range of successful apprenticeship programmes we offer here at British Gas; for example our great quality engineering apprenticeships, delivered through our Training Academies and leading to a Level 3 QCF Diploma. This technical training is complemented brilliantly by the Duke of Edinburgh Gold award, which our young apprentices participate in to help build softer skills around confidence, communication and team-working. The discussion moved around some fascinating areas, and there were some great insights in the room on the perceptions of apprenticeships, the role parents and teachers have in ensuring young people don’t feel they have to progress down the university route, and how the education system could better support young people’s pathway into employment straight from school in a simple way.
There was also discussion on the role of small business and social enterprise in supporting apprenticeships and training for school-leavers. This left me wondering about the role British Gas could play to support social enterprise attract young talent directly from school. I’d love to hear more from people who are involved in mentoring Ignite and SBT businesses, and whether you think we could do more to help those businesses support young people into jobs straight from school. Likewise if you are involved with schools, I’d be interested in your thoughts on what more we could do to best support young people into employment.
Abi Robins, Director of CR Programmes
Improving Your Investment SuccessPosted October 10, 2014 by Ignite
I’ve been working in the Ignite team for 9 months now and I’ve spoken to many organisations who are looking for investment and I’ve also read many applications for investment. The key challenges I’ve seen from entrepreneurs are around not having a robust business plan, being too focussed on social impact and not the financials first in order they can make a social impact; and not tailoring their application to the investor they’re applying to . Here I share my learning in the form of my “top tips” to investment success:
Start with a good Business Plan– A good business plan will make you think through exactly how you’re going to make your business work in order to make money. And yes, Ignite might be an Impact Investment fund but we know that people won’t make the social impact they want to make if their business plan isn’t viable to start with – so really focus on the financials.
Make a list of all the investors that are relevant to you – You can find a great list of Impact Investors on the Big Society Capital website. Look at all the investors and their criteria and examine whether the basics of what they offer (eg level of funding, type of investment etc) – look right for your business.
Do a desktop exercise to examine fit of potential investors with your business before you approach them – Go to the Big Society Capital website and other sources and list what type of investment each investor offers, over what period, what else they can offer (eg business support); and how each one matches against your “ideal” scenario. Also ask yourself whilst one investor might be willing to invest in you, do you share the same values and ethics? Will you be borrowing the money on terms that work for you? The chances are, if you don’t feel it’s a good fit from the start then it won’t be right for you further down the line.
Talk to multiple investors at the same time – Investment can often take time to come to fruition so you don’t want to put your eggs all in one basket. In my experience social impact investors understand this and are supportive about potential investees talking to multiple investors. They’re also generally happy to co-invest with other investors for social good.
Talk to Investors before you submit an application – Pick up the phone and have a chat. You’ll often be able to gauge whether you want to work with that Investor from a conversation and it will also give you an opportunity to assess their appetite for investment in your business. In the long run it will save you the time of submitting an application for Investment you might later decide isn’t right for you. The investor should also be able to give you some pointers as to how to submit an application to optimise your chance of success for the first stage of their process.
Tailor your application for your investor – There’s no point in sending a standard business plan through to an Impact Investment fund if what they really care about is social impact. That doesn’t mean that you should totally change what you are doing – just that you might want to dial up the relevant parts of an application so they don’t get missed. A tailored application that ticks all the boxes for the investor will put you in the best position to get through to the next stage.
Be honest with yourself and potential investors – Don’t change the fundamentals of what you are doing just to suit an investor if it’s not what you really set out to do – it will only lead to problems further down the line. Be true to yourself and your values – a good investor will understand that not every potential investee is right for every investor.
Ask for the amount of money you really need – Aim high, you know what you need to make your business success and if it looks like too much straight away the investor will let you know. Make sure the amount you are asking for is reflected in your business plan/financials. If it’s too much for one investor then you can then talk about what would work for both of you.
I hope my insight is useful to anyone out there looking to gain investment for their organisation. If you’d like to discuss applying for investment to Ignite then you can email the Ignite inbox here and I’ll get in touch with you. You can find the Big Society List of Open Funds at http://www.bigsocietycapital.com/open-funds
Kate Lemon, Market Development Manager
Social Saturday!Posted September 12, 2014 by Ignite
The UK’s first ever Social Saturday is tomorrow, September 13th. It’s a national day in which we can all celebrate and buy from Social Businesses. A Social Business is an enterprise that trades for the good of both people and the planet.
Social Businesses are particularly close to our heart here at Ignite. Not only are we an Impact Investment fund that invests in, and supports Social Businesses; Centrica, who back Ignite, have also been finding other ways to support Social Businesses.
At Ignite here are just some of the ways that we have been supporting social businesses:
1. Providing investment and tailored business support to energy related organisations that are making a social impact. So far we’ve made three investments, for three more we’re dotting the I’s and crossing the T’s on investment contracts, and are accelerating 10 early stage businesses.
2. Buying support services from other Social Businesses – wherever possible we purchase from Social Businesses such as Unltd, Rapanui, House of St Barnabus, The Good Analyst, Impact Value, Volans and Livity.
A good example of the positive impact you can make when purchasing through a social enterprise is represented through the work we commissioned Livity to do for us. Livity are a Youth Marketing Agency who work with young people every day and help with training, equipment, support and opportunities to build a brighter future for them. We’ve used Livity’s strategic, marketing and digital skills, and also supported them by taking on young apprentices for long term work experience within Centrica.
Centrica and British Gas have also invested in the Social Business Trust, a charity which, in turn, makes investments into Social Businesses and provides business support to its investees. Centrica have provided the Social Business Trust investees with over 50 days of professional support from our people. Centrica also provides an employee to support the Social Business Trust’s work all year round. Find out more about the Social Business Trust at http://www/socialbusinesstrust.org/
We’re also encouraging Centrica and British Gas to partner with Social Businesses such as The Do Nation, and Generation Community, organisations that were introduced through Ignite. We’re optimistic more of our Big Energy Idea winners will finalise partnerships with Centrica and British Gas by the end of the year.
What Can You Do Differently?
•On Saturday, why not make a purchase from a social enterprise? You might be surprised at the range of diverse things on offer, from chocolates to bikes to toiletries. Check out a full range here: http://www.socialsaturday.org.uk
•Don’t make your social purchase a one-off purchase. Think about how you can purchase from social enterprises moving forward.
At Ignite we are actively supporting Social Businesses through buying from them as well as investing in them – and we hope we’ve inspired you to do the same thing too.
Sam Salisbury, Investment Principal, Ignite