In Conversation With Daniel Brewer

Thank you. Hello and welcome to the Philanthropy Impact podcast. Listen on for insights into philanthropy, impact investing, and sustainability. Okay.

Well, welcome to Philanthropy Impact Podcast. And today we're very much delighted to have Daniel Brewer join us as our uh guest. He's the founder and CEO of Resonance. A social impact property fund manager, which will explain even more about what that is. So I probably didn't get that right. And um uh a pioneer in a lot of this kind of thing. So um maybe we could uh start with um

You founded Resonance in 2002. Can you give me a sense of what your journey was towards that and getting to that point and what motivated you? Yeah, of course. Um, so I'm an engineer really at at my core and and I had a few years in working in the manufacturing industry for a big engineering firm and

Was fascinated to just observe uh what was working and what wasn't working. And one of the things that I felt wasn't working, um was the way uh decisions were being made in the pursuit of short term property. At the expense of literally everything else. So product quality, customer satisfaction, staff, the environment, everything was sacrificed for this term that was called shareholder value.

And I said what what why does shareholder value just mean this quarter's profits? Um and have we ever spoken to our shareholders and asked them? what they might actually value. Well, as a nineteen year old, I didn't realise it was a kind of radical question. And and there's a bit of it that's not very radical at all. It's all very just a little bit literal.

Um, but I kinda got laughed out of the room, but it started me on the on the path to trying to find a way to connect owners of capital with users of capital and and was convinced that there must be a better way of business, even without an impact lens or a purpose lens, just of doing good business over time.

Um, but then I stumbled across social enterprise. Um, I was backed by an entrepreneur who who wanted to, you know, sort of took me under his wing as a apprentice. Um, and I was intrigued by this social enterprise business model that was market-facing, selling services, products to individuals and businesses, but underneath, uh not very deep underneath, but that their their purpose was bubbling out. uh all about trying to achieve

um good things, um particularly around supporting uh some of the most disadvantaged people to to to to elevate their opportunities. And I thought, oh my goodness, I had no idea you could take purpose and and and and um and fuel it to this degree in terms of uh

why you would be in business in the first And the more I looked into this, more I discovered that this wasn't actually a terribly new idea, that if you look back to the roots of Guinness and Boots and Cadbury's, these were all really, you know, businesses. That were set up to solve a s a specific social problem. They weren't set up to be good ethical businesses. They were set up to

Privy of the rich and and I thought, okay, so this this is a this is something that can work and can scale. All we now need to do is to try and connect it to to uh to investors who care about those things. Um so Resonance was born with the backing of a small charitable foundation. Um and uh we went out to try and find investors who cared about things more than money and we were trying to find social enterprises or enterprising charities or purpose-led businesses who might want that.

And uh yeah, the sort of sh short short story at that point is five years of um uh being misunderstood and and suffering with self-doubt, uh five years of just about earning a living. And then it was about 2012, uh, which was a bit of a watershed moment for us where um big side capital emerged.

um and and critical for people who don't know big society capital is the main. Well actually and they've changed their name now, haven't they? So they're now called better society capital, but they were big society capital and they had been given uh in twenty eleven, twelve, uh four hundred million pounds worth of dormant account money, which is money that had been sat in banks and building societies for over fifteen years and not Banks had lost touch with their

uh the customers and so they've handed it over to the reclaim fund who then went through a process protecting it and ensuring it and then releasing some of it to yw'r newydd, ac yw'r newydd yw'r newydd. Yn yw'r newydd yw'r newydd yw'r newydd yw'r newydd. Yn yw'r newydd yw'r newydd yw'r newydd yw'r newydd yw'r newydd yw'r newydd yw'r newydd yw'r newydd. But also Simon Chisholm uh who joined me as co-director uh

joined me after sixteen years at Rothschild. So suddenly we had had a partnership that was able to do some some some really good stuff. and build on the the track record of a few deals that we'd done um over the the the sort of decade of the emergence uh of what what now is is known as the you know the impact investment. Before we talk about residents in more detail, nineteen years old.

Um, I'm trying to get a sense of really where you came from, what motivated you. So for example, I've had to start my first business when I was eight years old. And and and and it was a way of of helping us at home, et cetera, et cetera, et cetera. Uh so what led you to being a 19-year-old to have this kind of insight and then to take action? Well I I think um I came from a very safe uh home upbringing.

um didn't have an awful lot of resource, but uh there was a you know a lot of a lot of love and a lot of protection and I was always challenged to ask why and I had this first to understand and it's also a uh a a principle really of of engineering which kind of was reinforced in me through university and through my um uh various apprentices that I did always to go back to first principles, um, not just to take what was told to you as red, but but go underneath.

So um those two things uh mixed with and I don't know whether this this It's part of my personal faith journey or uh uh other things that I kind of were paying attention to as a child, but I really strong sense of social justice. Um wanted to be I just wanted to be useful. I wanted to have you know, I I I don't think I had any great grandeur delusions of grandeur that that would, you know, ha have some sort of hero conversation. I just didn't want to be a waste of time. I hate waste.

Um and uh and so I uh was intrigued by you know I think that's what I w when it worked in the food industry. I just thought, well, at least, you know, be helping make a machine that would help make some bread and that would be useful. But actually it seemed like it was lost in this in this

web of just trying to confuse people to buy different loaves of bread all made on the same machine, all made by the same company, just with different wrappers all the time. It was just like this isn't we don't need this stuff. This isn't utility. This is uh This is just consumerism gone mad. Uh and I didn't feel used to be.

I was desperate to feel useful and understand. So I think the mixture of some of those things I I it I didn't it doesn't come from a place of disadvantage. In fact it comes from a place probably where I would describe of of real privilege. I've always felt really privileged, even though You know, I'm I'm I haven't got I'm not backed by wealth. I haven't kind of been brought up in in in some um elite way but uh but but always felt like I I wanted to be helpful, wanted

Oh neat. Much nicer story than mine. Um, because I I wanted to have cash at that age so that I didn't steal cigarettes, I could just buy them illegally.

Anyway, um okay, so tell me about Resonance, what it is, what its purpose is, um, and um what's happened uh since two thousand and twelve. Yeah, great. Um, so like you say, we're an impact property fund manager. What does that mean? Uh it means that we uh attract uh institutional capital mostly um and we go out and buy typically uh ordinary homes and ordinary streets street street properties uh in in ones and twos and we lease them to high quality housing partners, social enterprise.

specifically uh support um vulnerable people, people of vulnerable Uh and they make those properties available to families facing crisis. So there's 109,000 families last night uh sleeping in temporary accommodation. There are two women a week that are killed by a partner or an ex-partner. Are over 2,000 adults with learning disability living in hospital because the right support for them is not available in the community.

And uh we have solutions to all of those things, or at least we have housing solutions to all of those things. Um uh it's a thirty billion pound market opportunity and we have so far raised about one percent of what we think the need is. So it's a massive scalable uh challenge uh uh but also an opportunity that we're beginning to see very significant sums of capital begin to flow um in ways that

strengthen the enterprises and put people first. Um we do some other stuff which we call our impact labs where we use blended finance and work with um Professional investors, but some individuals and foundations to do some more adventurous investing, typically around some of the solutions that people face to challenges around. uh uh around uh housing, you know, you don't fix homelessness just by putting a roof over someone's heads. You actually have to do educational support and employment.

Okay, so you don't um manage the homes, you buy them and then in effect lease them out. How how do you deal with quality control and managing risk if you're using third parties uh to actually uh deliver the service? Yeah, such a good question. Um so we have uh uh a tailored a lease that that helps share the risk with our partners. So firstly we think of our tenants as partners, their customers.

Um so much of the property industry treats tenants as this uh this sort of cash cow that's a bit annoying. You need to tolerate it whilst they occupy your work above. Um even the landlord and tenant act is optional. It's it's just not a great um set. Um so we designed the lease with the housing partners. Um

And uh and we set out some expectations together, both in terms of what we as a fund will take responsibility for. So we take responsibility for all the kind of big capital items because that feels like an asset management. But the uh the housing partner takes responsibility for day-to-day maintenance and and voids. They're the ones that can manage uh the relationship.

Not all housing partners though, not all social social housing uh uh nonprofits are um uh uh at the top of the list of being ideal. How do you how do you address that? Is that an issue for you?

Yes. So we uh uh over over twenty two years have learned the difference between a homelessness charity and a homeless We've got uh a very thorough diligence process that uh that looks at everything from their commercial robust frankly, anyone could do through to the quality of uh the impact that they have and the culture that they operate.

um to ensure that they are uh interested in in seeing people progress away from crisis. Uh you know, I have I have witnessed Um, homelessness charities uh make decisions that perpetuate the problem that they're set up to solve in order to maintain their own balance sheet and they feel like they are doing something that is right for the charity commission.

uh the pressure that they're given to create a stable organization. But actually they're so reliant on income that they don't want people to get the job. Um and it's really distressing. So we know where to push uh on those buttons and and we maintain uh you know a constant dialogue with with them. Um and I think one of the other things that we do that I'm most proud of is actually the get we get them together. So we have what we call a housing partner forum and

Uh it's not it's not a about playing anyone off against each other. It's actually just about sharing good practice. And it's really, really inspiring to see someone who's got an idea or something that's really obvious to them and and work. And and then another organization go, oh, we should do that. And uh and away you go. You've kind of gone, we've just in in you know helped facilitate improve standards. by opening dialogue. Uh But staying focused on people, you know, we

have impact management uh measurement exercises every year. We engage with tenants. We have tenant forums now. Um we we ask all the questions uh and we start to understand the journeys of people and that then affects our decisions together with the housing partners about how we will how we will focus.

Is there ever an opportunity for tenants to buy their house? Oh, it's one of my dreams, John. Uh there's only been one tenant I'm aware of who has gone on to buy a home and it wasn't our But one of the one of the challenges that we've had is is around know, how can we encourage people to move on? We don't want to be oh, you know, so we can so we can help more people, you know, we we want we want people to move out out of our homes, but we want them to move out stronger.

Um and occasionally we find uh uh opportunities to design well what if we could help people say for a deposit and what if that deposit was buy a house, not just rent a house. And what actually that was to buy the house they were in, because moving moving on might be m staying put, but actually becoming an owner. So we have we have designs and plans to to explore that.

um, to enable people to buy a one percent share in the property and then staircase out over time. So actually we could become a homeowner owner with no more Um, which is possible. Um we've done it with some of our other work. Can you tell me how to do that? I could like could use that. Well, it's I mean, it's just using a shared ownership model, but it's it's it's not recognized by the uh

the housing regulator because they assume that you have to own I think it's a minimum of 10% of a property in order to be suitable to be an owner. And I have some problems with some of the the the the the first principles, the fundamental thinking behind that, uh while whilst I understand uh why they have a threshold there, um I would love to to challenge

and uh and see see a way to people becoming homeowners because they're in the home that they should live in and and and and own, at least a part of. Why can't we get the the legal system to support that? Um long term you're a that's terrific. You're a social investment firm. Are you regulated uh by the FCA? Yes. Yes. So we we set up as a

Resonance, we have a Resonance Impact Investment Limited, which is an FCA authorized regulated subsidiary. So all of our fund management and deal arrangements. Yeah, we do do some things outside of a regulatory work, some grant Uh the vast majority. regulated income. Well you're you're a non profit organization that has a number of subsidiaries. Are you also a registered charity? We're not a charity. So we're a social enterprise reg registered uh

social enterprise. We're very proud of our social enterprise mark. Um uh and uh we're a B Corps um and we do have shareholders ourselves so but the shareholders are a mix of charities themselves. Uh and staff. As shareholders. But one of our the principles of being a social enterprise is that you commit to uh reinvesting at least 51% of your property.

And and only ever distributing a maximum of 49%. We've never distributed any profits just yet. But yeah, so really committed to the cause and building something that is valuable for many generations.

So I'm just going to take a little side trip for a second. Um I want to come back to FCA, but um um so you have the ability to distribute uh profits uh to the shareholders. I assume you're one. I am. Are you prepared for the culture wars that might happen if you actually ever do that? Uh yeah, we're prepared for it. Um uh you know part of of of what we're doing is is to be very transparent about it, you know, we're not shy.

I plowed took 20 years of my life and many of those were at very, very low salaries, uh, to try and make something something work. It is definitely, you know, my baby. It's something that I'm very proud that it has got to this stage. Um but rather than wait for some super exit that Daniel Brewer has has his eye on. We're talking about uh well we we've given already five percent of the company to staff um through an employee benefit trust.

Uh, we're talking about the next generation of what we're looking forward to explore resonance eventually becoming a steward ownership company. bit like um it won't be the same as Patagonia, but this idea of uh uh owning a company is not necessarily s t t in to steward the values and make you know decisions on who the direct uh should be separated in i in an ideal world from those with economic

Um and so we're we we're exploring ways towards that. We're in we're in no great hurry. Um no one is pushing us and every time we have an injection of capital into into resonance. So we've had two two charities so far who invested in us. We've said we're building something. There is there is no exit path. Uh it doesn't mean that there won't be an exit or an event. Um let's build something valuable together. Um

dividends have to happen at some point in order for it to be really valuable. Like, you know, people to believe that. So it's a it it's a journey that we're not on our

not in a hurry to complete uh but we are building so do you present uh to investors do you present uh the investment as investing in impact investment yeah Uh so you're talking about uh into resonance or into resonance's funds? Uh into the funds. Yeah, exactly. So the all all the funds are 100% focused on impact. Um and and we say, yes, this is uh an impact.

Uh, none of our funds are you know, provide super returns. We think that uh at least some of them provide a risk adjusted return and that's why we've managed to begin to unlock some pension. Um and they they value a fund manager that doesn't have a bonus culture. You know, none of us get a bonus, we just get paid a salary. Uh they value the fact that as a fund manager we're uh

uh you know, a B Corps and a social enterprise ourselves. Um, but they uh you know also are are backing the very clear cause of what we're trying to I want to do that. So the new FCA uh rules around consumer duty and customer centricity and then what's coming down the line around SCR, uh you're going to easily fit within that then, sounds like.

It it it you know, it's not uh it's not uncomfortable. It's m it's it's more things we need to pay attention to. Um but yes, exactly. You know, on the S S D R and probably we will go down an S F DR, which is the European Yes, we are, you know, growing up in in a in a space where there is increased regulation, but all of that regulation is is stuff that intrinsically we don't fight against because we broadly agree.

treating customers fairly and with respect and um and and making sure that we steward our assets for future generations and have considered the risk. environmental um and social around all that we do. Okay. And then you've set a precedent. Oh, there's so many questions I want to ask you, but we don't have a lot more time.

Uh you set a precedent uh a year or so ago by uh accessing mainstream capital, which is the f I think the first. uh for any social enterprise or social investment fund to achieve. Um tell me a bit about about that, because that was quite a breakthrough, wasn't it? Oh it's a massive breakthrough for for us. Uh it's five or six years ago.

Uh that was probably longer than that, probably nearly 10 years ago. We we were pitching our property funds to some pension funds and They they kind of just went, Well you're too too small, uh this is too new, you you you as a fund haven't got fund manager are are an unquantifiable uh entity, you're you're not one of the big names that we recognise. Uh we love what you're doing, but we just don't know how to put put you in a box. And so

We took that as a positive and we said, Okay, well that's fine. So we need to work with the investors who can cope with us for now. We need to build a track record. We need to demonstrate that we're serious about returning money, paying returns, as well as achieving impact. we need to uh keep growing in the way that we can. And then um I think it was uh yeah, it was just after after the pandemic. we had been pretty successful getting investment from um uh our

local authorities. So we'd had started with individuals and then foundations and then we had worked with uh local authorities invested. And and and some of the officers on the local authority decision making group said, Well why aren't we doing this with our pension? And uh we said, well, we'd love to have that conversation. Um and so it was actually Greater Manchester Combined Authority who invested some money, but they um were in touch, very close in contact with Greater Manchester.

Um and so uh they had uh a a good look at the fund and thought actually this does meet our risk adjusted return criteria. We have a pot that can do very low. We can see how this is good for our members because our members are people who care about great amounts. So uh and and the social outcomes, you know, none of us want to retire into a a city that is full of people who I'm less old.

rough sleeping. So this is actually in the interest of our members' future. Uh and uh and so they they they made the investment and everyone said, oh it's only one and that's only because it's greater Manchester. Uh and uh they came back and did it, they topped it up again with a second ten million. And then South Yorkshire um uh joined uh a a year later. So uh we we've now got two pension funds who've um invested in our main fund along with others.

Um, and uh we are, you know, cautiously optimistic that uh that is now a market that we can we can serve well um and is certainly one that understands what we are trying to do. Um but you're right, it sits there as a institutional mainstream fund, private funding. And is that um uh one of your partners, Schroeder's or ca Casimova Capital?

So uh we work with uh some of the people at Schroeder's um and and particularly through the Schroeder's BSC Impact Trust. So that's the partnership between uh Big Sciety Council. Um but we've been talking to Schroders a lot about uh and and some of their clients. But yeah, we like we're natural collaborators and uh Schroders are definitely one of the outfits that uh we're very pleased to be. So do you still have a long way to go to uh uh penetrate that uh mainstream market?

Well, look, uh uh we we look after three hundred and fifty million pounds of other people's money and there are groups of people around us who think that is super successful. Um you finally arrived, Daniel. Um you know, I'm very proud of it, but uh our chair who uh uh Karen who advises a number of pension funds.

Don't mention that number, Daniel, because it's so small that you'll be written off before you before you they finish the sentence. And so so we are caught in between The ones who are the you know, the the pension funds and other investors who who who have the ability to write slightly smaller check sizes, either because they've got more control um or they want to do it anyway.

Uh and we have a little way to go. So yeah, the magic number is to get apparently is to get to a billion. And at that point you've got a billion under. He stopped. When when do you think it'll be getting there? Sorry, say that again. When do you think you'll be at the billion? Well, we've set a target for get there by twenty thirty. So we're a third of the way there. It's taken us since twenty twelve, uh, you know, twelve years to get to three hundred and fifty.

And now we want to go uh you know. Three times as fast. in half the time. Uh so we'll see. Uh it It's possible.

Uh in terms of um uh trusts and foundations who have large endowments, yes, a big issue around harm versus good. So they give up money as philanthropy doing good, but they invest in some cases in traditional or may maybe in um negative screening. Um, are you doing a lot of work to try and convince them that they should be doing quote unquote impact investing?

Uh we we love and work with many foundations and value it their input. Um but the the challenge that you you pose there is is one that continues to be something that foundation trustees wrestle with. Um the the best ones that we found are um uh allocating a certain portion of their endowment to be impact investing whilst continuing to do

as little harm as possible in their main main endowment. Um, I think there are a few that are part of the hundred percent club that are determined to invest right across the risk portfolio, but for as much uh impact as possible. Uh it would seem to me the role of professional advisors there and also in the general marketplace, wealth managers and stuff. Um, and uh should and the finance industry uh should be supporting you and stuff. When you know we work uh with professional advisors.

Um, it would really be good to look at a strategy to start to move towards that billion. So we can talk offline about that. Yeah, well there's there's something like sixty billion pounds worth of charitable money that is still on the stock market, um, really just pursuing financial return in order to generate grants. I and I understand that model and it's hard to move that tanker around.

That's a that's an awful lot of charitable money that could be a portion of it at least allocated to impact investing. And and we hope that we're you know, a a a translator of that for for the social enterprises, some of whom, you know, really only need two hundred and fifty thousand community well there's there's so much i i want to talk about and we're just about at the end um um have uh donor advice funds played a role in investing in you

Because I know in the US there's a donor advice fund we'll only do impact investing, but there's no one here. We've just done research and we've uh researched every donor advice fund, their characteristics, etc. And it's all on our website now. Are they uh investing in you? We so some we we have. We've got uh two donor advice funds that have invested. So stewardship uh services have in have have invested in one of our funds, and the other one is Golden Bottle Trust, part of Hawes Bank.

um outfit. They invested in one of our funds and and of course that went uh on to set up Snowball, which is a is a collection of foundations. Um uh some of the bigger ones

you know, are doing it in a different way, haven't yet found a way to work with us. That's okay. We'll we'll we the door remains open. Um I agree. I think there are some some real opportunities. I occasionally they just get a little bit nervous that impact investing is going to somehow cannibalize the the donation mentality and people might donors might Just go, Oh well, if I can get my money back and do good, then I'll stop giving the way. And and our our experience is that

Um owners of capital don't behave like that. They they have a donate donation pot and that is what they want to do. And there is plenty of need for genuine philanthropy, but there is also space for impact investing.

Uh-huh. Okay. So um I have two more questions. Um the first one is, are there any questions that I should have asked you that I didn't? Oh gosh. Um You yeah, you weren't just gonna get away with sitting around on this, you know that. Oh, that's hard. Uh I I I I I suppose the challenge I I feel is, you know, are we are are we are we are we making an an impact as a as a sector, you know, are are

Are we are we winning? You know, does it does it actually make a difference? And uh and a lot of that's around some of the existential threats that we face, um around climate change. uh displaced people uh and i you know wanna make sure that we as an organization as we get bigger we don't become so much part of the system that we don't channel you know channel a change. Um and that we are being this is an effective mechanism to to do that. So

that climate change for us is a is a is a challenge. We all want to get to net zero, but here we are housing housing people on very low incomes and uh and then people say, Oh, it needs to be zero carbon homes and we're like, oh

I'm housing homeless families. How can I also do that? But you know, we we lean into that challenge and and we are working very hard to uh to see how we can um uh introduce low carbon technologies to our homes, which is is super hard because it's about twenty thousand pounds worth of kit that you need to put into a

A home and it increases the value of that home by exactly nothing and it increases our income by exactly nothing. But it saves the tenants some money. So we're trying to work with partners who can help capitalise that. And we've got some interesting programs. So yeah, uh good question to ask yourself. I won't even ask what the answer is. Um anyway, thank you very much. Our time is up. Um the model that you have there is brilliant, uh very inspiring. So thank you for sharing all that with us.

Oh thank you, John. Appreciate it.