Conscience capital, family enterprises…and Snowball

As part of an initiative to win mainstream recognition with the enthusiastic backing of family enterprises, such as Skagen Conscience Capital and C. Hoare & Co, impact investor Snowball has submitted itself to an audit of its activities.

The exercise marks a first. It is all too common for managers to publish ESG reports, but only too rare for them to publish the results of a third-party review.

Family enterprises are generally wary of the inconsistency of ESG funds and the fees charged by asset managers to look after them, and often back impact investing

Snowball’s auditors, The Good Economy, praise the firm’s systematic approach and risk management. But it also has criticisms. It is concerned that Snowball could fall short in its mission to change behaviours in the capital markets: “It is difficult to determine the extent to which Snowball has influenced systems change, and other institutions, to embrace impact investing.” 

Chief executive Daniela Barone Soares says: “Of all the recommendations, I think this is the most challenging. It is hard to know where we have been responsible for systemic change.” 

But Snowball will continue to lead by example to achieve client return and social good.

Good is impressed with Snowball’s bullseye impact rating service, which rates managers for their research, engagement and success in making an impact. But it says Snowball should share fund ratings with sponsoring managers. It believes Snowball could encourage firms to pay managers according to the impact they make. 

Soares says Snowball will continue to lobby managers in a “thoughtful and appropriate” way. But managers put up an awful lot of passive resistance to operational changes. The best way to get them thinking is by generating superb returns and winning business. 

Snowball’s funds under management, currently £30 million, aren’t enough to impress them yet. The financial crisis will provide another test, although it could produce a levelling. Snowball has invested in several impact projects with defensive characteristics.

Elsewhere, Snowball has top 5% B Corp certification and embraces diversity: 67% of the team are women. Several team members, and advisers, have a financial background, such as Peter Baxter (ex-Old Mutual); Sean Farrell (Partners Capital); Alice La Trobe Weston (Morgan Stanley), Campbell Fleming (AssetCo) and Rhian-Mari Thomas (Barclays). Soares has a background in finance, management and impact.

Snowball has pondered a market listing for an impact fund to achieve greater transparency.  It has won mandates from Bridge House Estates, a UK charity established in the 13th Century, and The Eiris Foundation, an adviser on sustainable issues. It is exceeding a long-term target to achieve annualised returns of 7%.

Family enterprises are generally wary of the inconsistency of ESG funds and the fees charged by asset managers to look after them, and often back impact investing.

Snowball co-founder Alexander Hoare is critical of companies that can use the accounting system to prioritise short-term profits at the expense of long-term prospects. “Reshaping finance has become an imperative,” he said earlier this year. 

Research by Columbia Business School published in 2020 saw the problem as entrenched and holding back ESG performance. Instead, impact investing is in the spotlight because its aims are more clearly expressed.

Several next-generation family offices based in the US – such as Nat Simons’ Prelude Ventures and Lukas Walton’s Builders Vision – have learned how to turn finance to society’s advantage, as has Rockefeller Foundation, a Snowball supporter. 

Generation Investment Management has won $36 billion from family offices and institutions by taking account of sustainable and impact issues to outperform in mainstream investing. Big Society Capital, founded in 2011, manages £2.7 billion thanks to early support from the UK coalition government, which legislated to let it hoover up cash from dormant bank accounts to fund impact investing.   

Snowball is a movement backed by several families, co-founded by the C.Hoare & Co charitable foundation, led by Alexander Hoare, whose social activities have included investing in a social bond issued by Peterborough Prison. 

Hoare teamed up with a family charity, a non-profit called Panahpur, committed to investing all its capital in impact. It is run by James Perry, best known for starting a chain of ready-made meal shops called Cook, which stocks meals made by teams of individuals at their homes. Perry has also worked for B Corp.

Skagen Conscience Capital was another initial backer –  co founded by Mark Philip-Sorensen, whose Danish family built security firm G4S through mergers. More recently, the Sorensens backed Ecover, a supplier of ecological cleaning solutions. 

Friends Provident Foundation also invests along with UK charities Gower Street and the Ian Taylor Family Foundation. 

Snowball uses a multi-manager approach. It currently invests in 41 impact opportunities, the majority of which comprise funds managed by 30 managers. It has terminated just one investment. Snowball uses funds from the occasional mainstream manager, like Wellington, but most of its deals are run by specialist boutiques across various sectors. They include the Resonance Women in Safe Homes Fund; Circularity Capital; Ananda Impact Ventures; consumer tech firm Eka Ventures, micro-finance provider Lendable and agricultural technology specialist, The Yield Lab.