In Conversation With Danyal Sattar

Hello and welcome to the Philanthropy Impact Podcast. Listen on for insights into philanthropy, impact investing, and sustainability. Uh good afternoon everyone. Everyone. I'm pleased to be in conversation with Daniel Satter, who is a chief executive of the big issue invest. Uh we're going to talk a bit about uh what big issue invest is.

but his journey and motivation, and then to uh discuss uh some key issues about what uh social investment is, because I think there's still a lot of misunderstanding about what social investment is and where it fits on the spectrum of capital. So uh welcome, Daniel. Um so I guess the first question I ask uh want to ask you is uh you um uh joined Big Issue in 2018. And I'd like to get a sense of what your journey was uh to that point. Uh we could talk about what what's been since.

Well and what's really motivated you? Why are you why are you doing what you're doing when you could be out in the corporate sector doing all kinds of other Yeah, it's a good good question. Thanks, John. And and great to be here and uh having this conversation with you. I think what motivated me was well I could really go back

uh in in time. I suppose I started out in the New Economics Foundation and I started out there because New Economics Foundation was trying to change the global economic system. it was uh observing that the the global economy we had at that time was not working for people and the planet.

uh in the way that uh we might like it to do. And after about five years there, uh I thought, yeah, well it's great um uh doing the uh uh doing the you know, focusing on people and planet, uh and the and the global economic system, but we need to move money. um, if we want to have uh the change that we want to see in the world, uh we need to actually bring real cash money uh to bear on the

uh problems that we're facing. And that's what took me into the social investment world. Um, initially with Aston Reinvestment Trust. uh setting up a community development finance institution in in a city Birmingham to lend to people the mainstream weren't lending. Pat Connery was the inspiration for that. Steve Walker really got the thing going. And that was the start of my social investment journey.

how we can really bring the vast resources of uh financial markets to solve some of the social problems that we're experiencing today. Why why have you chosen this career path? I mean, what's what's in your background that sort of motivates you to do all this? And The I mean the real answer was um You know, the uh Rohingya refugees uh coming out of Burma, uh Myanmar into Bangladesh, as a child, uh I uh I went with my father to one to a refugee camp. I've been a refugee twice.

Um, but but this time I was not a refugee. Uh we were going there to see what we could do to help. Uh he was um an honest civil servant at the time in Bangladesh. And uh it's you know, the s the scenes there are the things that you see on TV and uh it it's really not great to see that um up front. And

I think for me that was that was a realization of I accept this as the way the world is, but I don't find it acceptable. And when I went back to Bangladesh uh some years later on um some postgraduate study, um Again, uh the Rohingya were being pushed out at that time. And at the time they were being pushed out through clear felling of tropical forests on the Burmese side of the border. And the driver for the clear felling of forests was an economic driver.

It was the timber demand at the time mostly from the West, now from other parts of East and Southeast Asia. And I thought that's the cause of what I'd seen as a child those those years ago. And uh I must Do something about that. And that that's what took me to New Economics Foundation and that sense of we need to change the economic system that's driving.

this kind of effect that's resulting in this uh in this refugee crisis that uh that we were seeing even even back then. That was just a microcosm of the of the movement um we've seen more recently coming out of Burma. So that that's really the root the root cause, kind of growing up and seeing that. That's quite something. Um childhood and uh uh teenager years can have a really major effect on uh what you have. So

I'm really pleased that you're uh uh living a solution for that. Well done. Um okay, so um then you um uh you were at one point with a trust.

Um and uh what were you doing there? What was it? Well, after after Asp after the um Aston Reinvestment Trust, the the early community finance institution I kind of worked a while looking to see how we could do this um across Europe. And then I was also involved in the early days of Charity Bank, really learning from the the people who founded Charity Bank.

But I shifted across the trust and foundation world um in a similar light. There were trusts and foundations are pools of resources for social good, and could we activate the endowment um to work for social good alongside the grant making that creates um so much um positive impact. Uh but if you are giving away

twenty, thirty, forty, fifty million, large amounts of money, but an endowment of a billion pounds might be sitting behind that. If we could bring to bear those charitable endowments on social causes as well, wouldn't that be a good thing? So Esme Fablin was really one of the the modern pioneers of uh uh social investing alongside uh many others, Barra Cadbury Trust and Trust for London and Joseph Roundtree Foundation.

Uh so that's why I went into that world. Again, trying to move trying to move the money uh in a positive way. And what did you manage to succeed? What kind of impact did you have there? Well, Esme Fairburn Foundation, uh, I can I o I always think of them with a smile on my face because they had a remarkably independent minded set of trustees.

It's probably the d dictionary definition of what a trustee is, frankly, in our charitable sector here in the UK. And they they were really um willing to take uh risk. And Risk is a funny thing. Everybody, every activity takes um takes risk. But they were prepared to innovate. They were prepared to do things differently. So they were quite prepared to say, well, the root of Esme Fairburn was back in the financial services industry.

Um Ian Fairburn set up M G Foundation, which was one of the first unit trust. uh organizations on the on the stock market, providing a way that from the nineteen thirties onwards more ordinary wealth people could participate in the stock market potentially. And it's the root of how we do much of our investing um through mutual funds uh to this day. So there was a financial services route and I think trustees thought, hmm, okay, well maybe we can put

um maybe we can apply financial services to to social good. So we funded all kinds of things. We were in the early funders of credit unions. Um We uh we invested in Charity Bank where I'd I'd worked before. That predated me and then again when I was there. Um, Esme Fairbones supported uh a land purchase fund. Um how could conservation organizations that urgently needed to buy a piece of conservation land get it if it was sitting there on the open market?

So at Esme, we would go in, buy the land, uh, lease it to the cons conservation organization, and give them two years um to buy it back off us through fundraising. great little program of work. All kinds of um financial needs of charities and social enterprises we were um we were investing in solving. Uh that's kind of grown. I think that's now about fifty million of

uh of social investment assets there in in Esme Fairban and it's continued to grow as a piece of their portfolio. So very good to do. equally good to do was working with others in the sector. So a group of four or five foundations got together and set up the Social Impact Investors Group, which is now hosted by the Association of Charitable Foundations.

And that network has grown and grown from that early start. And that was a way for foundations to get together and share their learning and also share investing. like in some of the the projects and organisations that came forward for social unless I think it's fascinating what you've been involved with. But it's also fascinating to me that I mean that was what 20 years ago, 15 years ago when that first started. Um, but there's still a discussion around harm versus good.

Uh so uh a lot of trusted foundations handing out money as donations trying to do good. And yet in many in many cases they're investing, not in impact investing, not even in many cases ESG investing, but maybe negative screening. It's still a big issue. Do you see that and do you see a solution for it?

Yes, I I I absolutely see that. I I think there are two solutions. One is in the mindset and the second is in the law. The one in the mindset might be that we've fallen into a certain habit of thinking what a foundation is. So we think of foundation as a pool of assets invested in a mainstream financial services market. which or mainstream financial markets, which yield money that we give away in grants. And we think that's what an endowment looks like.

That was not what Joseph Roundtree did with his money back in 1904 when he set up the various institutions that make up. Joseph Roundry Foundation, Joseph Roundtree Charitable Trust, Joseph Roundry Reformed Trust. Joseph Roundtree instead built houses to house the poor of yours. So three and a half thousand homes, which he just built.

Um, he set up the Reform Trust, which is not a charity. Uh it exists to reform politics, because Joseph Rountry thought if the poor didn't have a voice in politics, poverty wouldn't change, and at the time women didn't have the vote. Uh so he was identifying different solutions. There is a charitable trust founded by Joseph Roundtree, and then the foundation that exists to research uh the causes of poverty. So Joseph Randry didn't.

do what he could have done at the time. He could have said, Oh, you know, I'll invest my money in these new emerging markets like the opium trade in East Asia. and uh in the frontier markets, uh, under King Leopold and the Congo. He could have done that in the early nineteen hundreds and given away the no doubt large returns you get from the opium trade and the slave trade.

uh and uh use that to fund charitable good. He did not do that. He directly invested his endowment in achieving um a charitable objective. So I think something of this and philanthropists, that's just one example of a philanthropist, and there have been many of them who did these direct social investments. Um Peabody, um, he set up what's now the kind of the the extraordinary housing trust. uh housing the poor directly. So

There is a different model. So part of it is just our mindset that we think a foundation has to be a particular thing. The second is the law. That Uh there is a question, and I think it will be a good question for every foundation to have to answer, which is are you doing more good than harm with your assets?

Now, many trustees may confidently answer that at the end of the year by saying, yes, we think that's the case. We are investing in mainstream markets and we're giving money away, and we believe that the fossil fuel industry is uh a generator of economic growth and prosperity, um, as it has been undoubtedly, if you exclude the negative impacts that it's had. Um then you could make your case. But at least making

in requiring trustees to make a case that they do believe they are doing more good than harm would be a would be a good thing. It would make people at least ask that question. Not a not a bad question to have to answer every year. No, it isn't. And the charity commission's been trying to clarify what the rules are because we seem to be in the past misinterpretation about that. So hopefully there'll be a constant movement towards what you're talking about.

Um I guess that leads us to the big issue and big issue invest. And um how did you get there? Why did you go there? And um uh what's it all about? I had found over the years that I had tended to be working in organizations that were doing social investment as a as a side business and the opportunity to run Big Issue Invest, where all we do is the very social impact investment that I uh that I was doing all along was just a great opportunity.

It's an entrepreneurial organization. The big issue, the wider group, was set up in nineteen ninety-one by John Byrd, and it's a trading way for people to trade their way out of poverty. So our vendors who sell the magazine, they sell the magazine for four pounds, but they buy it from us for two pounds and they make the margin. So they are trading.

uh their way out of poverty. In truth, they're probably trading their way out of destitution and into poverty, but it's part of their journey uh of uh often of of recovery. And The founders of uh The Big Issue set up Big Issue Invest because John Byrd observed how hard it was to raise money when he was getting the big issue going. really the the Roddicts, Anita Roddick and Gordon Roddick with the Body Shop Foundation played a key role in financing the start of the big issue.

So in two thousand five they set up Big Issue Invest, uh John Byrd and Nigel Kerschel, to really try and have a coherent financial solution. for a charity or social enterprise that needed finance. So we do the whole range from startup finance.

to ordinary the kind of ordinary bread and butter loan finance that uh cash flow finance, acquisition finance that a charity might need all the way through to growth and scale, right up to, so basically from 25,000 to uh three and a half million in size at the moment of a of an individual investment. But it came from that need that social enterprises, charities need finance just like any other enterprise might need.

And if that's not well catered for in the mainstream, well, somebody ought to do it. And that's what the big issue is doing in Big Issue invests. So who invests in you then? Where do you get your funds? So historically it was uh a group of people who really understood the problem we were solving. And that ranged from some trusts and foundations, uh high net worth individuals, and mainstream banks to some extent.

uh because they could understand instinctively from their own business practice what we were doing as a lender, uh as uh as an investor. Then um big society capital came along. Set up as a wholesale.

to help grow the social investment market. So they've been a key investor in our in our growth stage. And then in this latter stage of our of our um of our lending, we're able to raise to borrow ourselves from a social bank, Unity Trust Bank, to make loans to the smaller charities, uh, supported by Access Foundation as well on that side. And on the other side, we we had two new funds: our Growth Impact Fund, that's an equity fund, and our um fund for social impact debt fund.

And each of those has got a different set of investors. So for the Growth Impact Fund, the Bank of America Foundation has come in, Access Foundation is there.

a range of trusts and foundations. And then on fund four, a secured private debt fund, we have two insurance companies have been investors, alongside Big Society Capital and the Church of England. So we've been able to separate out our products to almost design products that are suitable not just for the charities and social enterprises that we want to support, but for the investors. We have to have something that meets the needs of those investors, otherwise the money doesn't flow through.

I I think in yeah, sorry, John. Go ahead. No, go ahead, finish. I I was just saying it's in in some ways we're like We're like plumbers. Um uh plumbers take pools of water and they get it through pipe work to people that need it. And I think that's what we really are in the social investment sector. We're plumbers. We have to put the plumbing in place.

to connect those pools of money to the organizations that need it on the other side. And uh good plumbing, actually good plumbing saves lives. It's probably the greatest contributor to public health alongside uh probably alongside vaccination. So um have you been able to access mainstream capital like um residence uh has done? Yes. Uh and these two insurance companies coming into our uh secured uh debt fund are are the first of that. Of that way.

We have historically had um mainstream finance come in, but it's been from the edge, the very edge of mainstream finance, rather than from the core for them to be able to say, as with resonance. and social and sustainable capital. Um, this kind of investment into us is really from their their core pools of investment. We're making that um we're making that breakthrough.

So if I was an individual with lots of wealth and I wanted to not start my own social investment intermediary and I came to you, what could you offer me? We would of course have to check that you are um a suitable uh investor for the uh the funds that we have available. Uh we also offer a a discretionary fund management service.

So we can we can invest money on on your behalf directly. But broadly speaking, we could say the funds that we offer and working with an organization like Big Issue Invest When you go to a strange country, it really helps to have a guy. And social investment is a strange country for many people. So having an organization like us with our decades-long history of doing social investment is a good guide to this space.

So we can we can we invest money for social good and to do that we need to bring it in from the other side. And that's the core of what we do. What what are the returns for the different funds that And I'm not just looking at financial returns, but the impact returns, the and plus the financial returns. So the the returns on our um secured debt fund are comparable with unleveraged private debt funds. So we are in we're in the ball.

We have to be in the ballpark to pull in to pull in money. Um the Growth Impact Fund is a concessionary fund and it's not offering equity-like returns. So both are in high single-digit return figures to investors as uh as target returns. In terms of the social impact, we are doing exactly the same kind of social investing we've been doing these last twenty years. We've just segregated it into these different buckets so different investors can choose the different product they want.

the uh the lower risks cured private debt or the slightly higher risk uh equity like revenue participation like money that we have in the Growth Impact Fund. And we we invest in extraordinary organizations. Uh they range from um providers of housing through to a social enterprise dentist tackling the dentistry deficit that we have.

through to uh some of our really challenging investments are doing things like settling people out of long term mental health care back into the community paid on outcome. very deep, very intense um social impact. Uh we we invested in a school. actually do not do this. Um, don't set up a school. I mean, there are people who set up schools. You are heroes. It's an absolutely extraordinary thing to have to do. Uh we finance an entire school being set up uh to deal with kids who are absolutely

at the falling off the edge of uh mainstream school provision. And some of the most inspiring impact was simply the voices of the kids coming out of their exams saying to the head teacher. I finished an exam. I've never finished an exam. I was still writing when the bell went. That's never happened to me. Every single one of those kids came out uh passing an exam, which they had never, never done before. Just

just extraordinary. Of course, we track impact with deeply with data and analytics, uh, but sometimes just hearing the voices of kids out of an exam room just kind of tells you what impact design. It'd be good if uh uh we could share your impact reports on our website just so people understand what what's going on, because I still think there's a lot of misunderstanding about what social investment is.

I mean some people think it's an extension of uh philanthropy um and you have blended finances um but others um uh see it as um Um getting some return but limited return more around the social side of So I um uh I I have I have two phones. I have a work phone, so just to be just so you know I'm not selling a particular product. I have a work phone, it's an Android phone. I have my personal phone, it's an iPhone.

The guy who wrote the software, who led the team that wrote the software for iOS under Steve Jobs, is a guy called Charlie Clyston. And Charlie Kleisner went with Steve Jobs out of Apple to set up next. And when Steve Jobs went back into Amazon. uh he took next in and next became the operating system iOS. that uh that sits there in uh in our iPhones today. So Charlie Kleissner had a beautiful way of saying this. He just said, look, I love being an entrepreneur. I love making money.

Uh but he said the rewards for success were disproportionately large. uh he just made shed loads of money and he was a guy who just loved engineering and and loved doing the software engineering uh and meeting human need. So he set up a foundation with um with Lisa Kleissen, his wife.

uh to uh to give away uh the money that he felt was beyond what he had uh what he had earned. And when he was looking at how to invest his uh endowment in the foundation, he just very simply said, Why should I invest in the bath? I mean why? Why would I do it? So it it wasn't a question of why would you do social investment? It was well, why would you do anything else? Why would you want anything other than to have a positive impact with your investment assets? So uh looking at your career.

Um maybe just done a quick summary of something that's been uh quite fascinating. Um you've you've ended up with uh the big issue, big issue invest where you have much more direct impact in terms of of um putting money into things you talked about, whether it's a school or uh whatever.

What's uh what's next for big issue invest? Because there's been a series of innovations over the 20 years or more, has there? It it is, it is. I mean, I when I joined um Big Ish Investor, I looked at the job description and I thought I can't do this. So I phoned up Nigel Kershaw, who was the founder. I said, Nigel, it keeps saying you, you know, you want an entrepreneur to do this. And Nigel sighed and he promptly listed four or five things where he believed I'd I'd worked very entrepreneurial.

Uh'cause he said you you know, being an entrepreneur is y uh anyone can have a good idea, but you have to deliver. Uh and that's a key thing that Nigel and the others in the big issue group have delivered. So for us It's growth. We have to grow. We've got about fifty million pounds of assets under management in in the big issue. Invested at any one time in a hundred to one hundred and fifty organizations.

the need and the demand is is enormous there. And we have stuck to our mission, investing in social purpose business, charities, social enterprises, creating high impact. We have to continue to do that. The products that we've got out in the market there could triple our size in the next eighteen months if we're successful in uh growing them the way that that we want to. And the demand from our from our sector is is there. Uh

the flow of inquiries. People saying, I need to buy a care home as a charity in order to fulfill this local authority contract. I need the finance to do it. Um, I'm being thrown out of my school premises, uh, for my special needs school because the local authority school is expanding. I need uh two million pounds to buy um a building to convert to this new use. um I need uh three units of housing um to house people recovering from uh from addiction.

I need 300,000 pounds worth of cash flow uh so that I can support uh early years education. Um the need is there dropping into our inbox. uh, day in, uh, day out. And that's what we've that's what we've got to serve. That's what we've got to do. The thing that inspires me to do it is that This is not a new thing. uh Sir Thomas White, in fifteen forty two,

set up the Sir Thomas White Loan Charity and he set that up to lend to apprentices who are too poor to buy their own tools. If those apprentices couldn't buy their own tools, they couldn't become craftsmen and mastercrafts. history records the names by the male uh by the male pronoun there. Uh but that was a classic. Without those micro loans that Sir Thomas White was making, those apprentices couldn't increase their income.

The Sir Thomas White Loan Charity is going to this day in Leicester, all those hundreds of years on, and when you look back through that history, you will find again and again and again In 1775, a year before Adam Smith wrote The Wealth of Nations, a year before the United States got its independence, uh, the world's first building society was set. Irish canal diggers clubbed together uh to buy uh put pennies in a pint pot mug.

uh in Richard Kettley's building society uh to buy building materials to build our own homes. So every every generation has had to invent social investment. uh all over again it seems, uh, because the the identification that we can do something really good with money, uh, is is there. And uh that's what we get to do at Big Issue Invest, uh, in that long I find it really in interesting because the UK over the years has been ahead in some ways around this whole area.

I did some work in Thailand and Indonesia encouraging social entrepreneurs, ran a masterclass for them, went on rock radio to reach out to more young people becoming social entrepreneurs. The masterclass was unbelievable. First of all, it uh was less than not less than 20 people, and it was people from communities all over both countries. um, who had micro businesses or SMEs or whatever you want to call them.

And it was brilliant what they're it was just, I just came back so uh inspired. Um, but they didn't have uh Uh uh any wholesalers. There were no uh intermediaries like what you're talking about that existed in this country, so no support. Uh, for that to develop and stuff. But they managed to come up with all this stuff that was really uh quite phenomenal. And in some cases,

cases. And I think it ties back to what you're saying about how inspiring these stories are, people uh uh building something out of nothing um to uh improve society. But they're that it was just uh brilliant what they were doing. Um, I I didn't realize that you had a mentoring program. Um, and I I've signed up for it uh yesterday. Um, and I really want to encourage people, or you can encourage people to do. I won't do it, you could do it, but.

Um uh Tom tell me a bit about the Bentry program. Well, thanks so much for signing up to be uh to to mentor people. It it's part of our something we've done, I think it's the sixth time we've run one of these programs. uh corporate social venturing, we uh we used to call it this is now power up, power up London. And when you're starting out as a as a social entrepreneur, uh two things really help. Uh one is money and the second is good advice.

It's really useful to have somebody who's walked down that road um before you uh to help you uh with the stages of of growing a business. So this will be the second round uh we're running in uh in London of this uh power-up mentorship programme, which is a combination of grant support for social enterprises and this and mentoring support. And the the two things are absolute

Absolutely essential. Uh it reminds me of my um in in my um non work life. Uh I Tai Chi and our Tai Chi school uh had its origin in Professor Chen Manqing, uh who took the Yang style short form uh long form and turned it into a a shortened version, uh, to develop the health of the Chinese people um at the time. in the nineteen thirties and it gradually came out of the West. And when people asked the professor, What do you need to um

to do Tai Chi, um he would say three things and the third thing, the least important thing, was natural talent. The most important thing he said was good teaching, and that's what the mental The second thing was persistence. And oh boy, social entrepreneurs need need possession. And the third, the least important, he said, was uh was natural talent. So that's why I think mentoring is so important uh in this program. That's really the good teaching. Sounds like it's gonna be uh uh

Well, I hope I'm successful, but gosh, that sounds like a lot. Uh that's good. So we can encourage more and more people to do that. Uh can they just get in touch with Big Issue Invest to uh uh inquire about that or anything else that you're doing? Yes. Okay. Um I can I just uh end with um a couple of uh

questions that uh move us a bit away from what you've been talking about. One is one is about we don't we work with uh high uh private client professional advisors, you know, private banks, tax legal, uh wealth managers, et cetera. Uh two high net worth ultra high net worth individuals. And um uh one of the things we're trying to do is to get them um um understanding that their clients, uh, based on our research and other research, really want to do good with their money.

And that's good, philanthropy, that's good, social investment, that's good, and impact investing and stuff. Um do you see the role of professional advisors in discussions with their clients? as an important part of of uh uh introducing them to uh not just values-based discussions but values-based uh approach to the use of their money. Do you see that uh advisors as an important part of the

I I I said that in some ways in relation to Big Ish and Vast, but uh a a colleague of mine took me along to see a real live Indian guru. I'd never seen a real live Indian guru, Sadhguru, came to London. Four thousand people were there in the uh Excel Center. And somebody asked uh Sadhguru. They said, Sadhguru, because he does this question and answer thing. Uh he was he's very good at this. So they said, Sadhguru, why should we have a guru?

And Sadhguru said, when you go to a strange country, it helps to have a guide. And that's what he was doing uh as uh in in in his piece of the world. Now, professional advisors are not necessarily uh gurus such as Sarguru, but a professional advisor is a guide. to this strange land that that you're that you're in. So professional advisor is absolutely essential to helping uh people along the way in this. Of course you can do it yourself and uh and many have.

But having uh good advice is um is is rarely We're just out of time. I think we've gone over slightly, uh, but uh this has just been so fascinating. Um I'm going to leave it to you to have the uh last words. So can you tell me your final words of wisdom? The world is the way that we have made Everything that we see around us has been carefully business planned and financed. That includes climate change.

It wasn't intentional to have climate change, but we business planned and financed the things that have led it about. So if we want the world to look different, we have got to invest in the things that change the dial the other way. So if we want a planet that works uh for people and for for our environment, we've got to move our money in that direction. That's what we're doing at Big Issue Invest, that's what we're doing with our colleagues and resonance social

Triados Bank, Ecology Building Society, so many are trying to do just this. So that's what we need to do to move the money uh from the negative. Daniel, very, very inspiring. 30 minutes. Well, actually a little more than that. So it's brilliant. Thank you very much for what you're doing and thank you for being part of it and supporting what we're trying to do as well. So thank you very much. Thank you, John.