Delegated Authority and Governance
Trustees have elected to delegate much of the investment process to the Finance Committee (FC) The delegated authority for approving the investment will be as follows:
- All new social investments must be approved by Council
- Subsequent investments up to £125k by the FC
- Any investments of more than £125k by Council
It may be necessary for decisions on investments to be taken outside of the formal committee meetings. In such cases it will be permissible to obtain approval via e-mail.
Monitoring of individual investments will be delegated to the FC. The format and frequency of these reports will be considered on a case-by-case basis, but there will, as a minimum, be a requirement for an annual report on each investment.
An annual report covering the full portfolio of social investments will be made to Council.
Assessment Criteria and Process
The assessment, recommendation to invest and monitoring of social investments will be carried out by Controller, directors, and the FC.
The investment process involves understanding and deciding on whether to invest or not. This involves up to 5 parts. An initial screen; a 1st stage assessment; a 2nd stage “in principle” decision; a 3rd stage final approval; a post investment decision stage.
1.Initial screen
Applications (enquiries, proposals or investments in the wider marketplace) will initially be screened by the Controller and directors in line with the Social Investment Policy. If eligible/in scope, in that they a) match our charitable mission, b) are social investments (not financial investments or grant requests), c) at this initial stage, look like they have some chance of success, following the initial screen, a three-stage assessment process will be applied.
Potential investments can be brought to the FC at any of the three stages set out below (indeed initial ideas can be tested with the FC prior to this as needed). Each stage has a different purpose.
2. Stage 1 (Assessment)
The purpose of Stage 1 is to answer fundamental or conceptual questions before detailed assessment or due diligence work has been done.
To pass Stage 1, potential investments must:
- Fulfil SSAFA’s charitable objects. .
- Only result in private benefit that is necessary and reasonable.
Stage 1 assessment will be undertaken by the Controller and directors.
3. Stage 2 (In principle)
The assessment will consider:
- Fit with balance of the social investment portfolio
- Alignment with strategic priorities
- Potential social impact
- Influencing potential
- Resource intensity: set up
- Resource intensity: ongoing
Proposals will generally not be considered further if three or more of the judgments are rated as ‘red’ unless the potential social impact and influencing potential are exceptional, reflecting the charitable objectives of these investments.
The FC will form a judgment whether to recommend the investment for in-principal support, subject to completion of Stage 3 checks, or to decline to take the application further. Stage 2 is an opportunity for the FC to pose questions that they seek to have answers on or raise issues they wish the investee to consider or respond to.
4. Stage 3 (Final approval)
Stage 3 proposals can follow on directly from Stage 2, where an in-principal decision to support has been made. Stage 3 will cover responses to the questions raised and address them, so a final decision can be made. This may include further due diligence checks. These may be carried out in- house or may be sub-contracted, depending on the complexity of the proposal.
It will be unusual for a proposal to arrive at this fully developed stage without some prior information or “heads up” to the FC at a previous meeting.
5.Investment
All the FC’s final investment approvals are subject to completion of a documented investment agreement, which is legally binding on both parties.
It will be usual for FC approvals to include terms and conditions that must be satisfied before going ahead with the investment. If any material variations to those the terms arise during negotiation of the legal agreement, the investment proposal is returned to the FC for review and re-approval.
6.Post investment and Exit
The FC should monitor individual investments. The format and frequency of these reports will be considered on a case-by-case basis, but there will, as a minimum, be a requirement for an annual report on each investment.
Exit strategies will be considered annually, as they will shape longer term strategic decisions, including how and where to grow.
The FC will consider elements such as mission and the impact of an exit on beneficiaries when considering exit. The most appropriate strategy will depend on the size of the investment, its financial position, beneficiary profile, and mission alignment.
Marketing and Promotion
We will be transparent about our social investments and SSAFA’s interest when asked.
Main sources of proposals are those referred to SSAFA via existing networks.
Resources
The Director of Finance will be the lead director for Social Investment. The Controller and directors will also ensure appropriate resources are available to support social investments.
Policy Review
It is recognised that SSAFA will always be learning from the social investments it makes and that this policy will be kept under regular review, usually annually unless the FC determine the existing policy remains sufficient.