THERE has been much discussion in newspaper columns, on social media and among friendship groups recently that the tragic coronavirus outbreak could result in some positive outcomes for society.

Many have welcomed the opportunity brought by the social distancing regime to slow down and spend more time with loved ones. Others have said it has created space to reflect on how we lead our lives and treat one another, be it in our personal or professional lives.

From the perspective of Alastair Davis, chief executive of Social Investment Scotland (SIS), the extended period of reflection will increase investors’ appetite to back companies with a genuine social purpose at heart.

SIS is a not-for-profit, Edinburgh-based social enterprise and charity. With investors such as the Dutch-headquartered Triodos Bank and the main Scottish banks, providing core loan funding, its mission is to support social enterprises, community groups and charities with loans and other business support. It also managed funds on behalf of the Scottish Government.

In 2018, subsidiary SIS Ventures launched its first investment fund, raising £1.3 million from individual investors, with sums ranging from a few thousand to hundreds of thousands of pounds. Those funds since been deployed to a range of early-stage ventures and social enterprises.

These include Brewgooder, the Edinburgh-based social enterprise which directs profits from beer sales to clean water projects in Malawi. Headed by entrepreneur Alan Mahon, it has responded to the coronavirus pandemic by providing vouchers to NHS workers on packs of its beer.

“Businesses that chose to embed responsibility and impact, through every aspect of their practices, and that includes the way they treat staff and support their colleagues, is something that people will value even more importantly going forward,” Mr Davis said.

“Some of the investments that the fund has made, and a couple of ones we are looking to make, and focused on much more socially-responsible medical technology businesses. There are still going to be illnesses and medical research – people are still getting from things other than coronavirus.

“There is still going to be demand from that type of investment.”

The impasse brought by coronavirus has had some impact on Social Enterprise Scotland. Mr Davis said the launch of the second fund under its SIS Ventures subsidiary has been put on hold.

A much bigger target, £3.7m, has been set for the second portfolio, as SIS Ventures looks to capitalise on growing interest from investors in “mission-driven businesses with purpose”.

“We’ve suspended the second fund-raise [until later in the year],” Mr Davis said. “We are still continuing to deploy money from SIS Ventures that we have raised from the previous fund-raise, so the fund still does remain active in terms of making investments.

“For us, in terms of a broader strategic point, when this does settle down, we believe the need for investment of the type offered by SIS Ventures will be greater than ever.

“When you do think about the concept of businesses that behave responsibly and with integrity, and we have seen that highlighted over the last couple of weeks as people have reacted to how organisations have been treating their staff, there’s going to be an ever greater need.”

Before coronavirus came to dominate our every day lives, SIS was already seeing growing interest from investors in companies with a social purpose, alongside a rise in the number of entrepreneurs setting up businesses with socially-driven objectives.

Mr Davis, who joined SIS 11 years ago after previously working with Bank of Scotland in community banking, said: “We do see, and this is widely acknowledged through a range of research studies, that entrepreneurs are now much more focused on setting up businesses that are not just about meeting commercial objectives, but also have some kind of purpose, be that broadly a social or an environmental purpose.

“That’s something that’s particularly prevalent amongst younger entrepreneurs, but not exclusively.”

He added: “There also has been a shift from an investors’ perspective, really right through from the individual investor right up to the institutional investment funds where there is much more of a focus on making investments that don’t cause harm, and also might be explicitly focused on making a positive impact.”

Noting that SIS Ventures is ultimately looking to raise £5m with the first two funds, he added: “The demand from investment from these types of organisations is increasing, and we want to be able to support these mission-driven businesses. That’s why we have started the second fund-raise.”

Asked whether investee firms are selected by SIS, or whether the companies approach the organisation for backing, Mr Davis said: “It’s a bit of both. I would say in the main companies are approaching us. They see a strong alignment between their own ambitions around purpose and the fund. There is something attractive for those entrepreneurs in having their purposeful approach they have endorsed with an impact investor like SIS.”

He added: “It’s almost like a badge of honour, in some ways, for these organisations to have SIS Ventures as an investor. And we know anecdotally from the organisations that we have invested in so far that is a positive thing for them for attracting other investors.”

People investing through SIS Ventures through the EIS (Enterprise Investment Scheme), which offers a degree of tax relief and as such is one of the attractions for investors. While there has been criticism from some quarters that the scheme effectively helps rich people become richer, Mr Davis said that, in the case of SIS Ventures, it helps to develop companies which make a difference to society and the environment. Investors in SIS Ventures are also eligible for the relatively new Social Investment Tax Relief, focused on more “conventional forms of social enterprise”.

In terms of its investment timeline, Mr Davis said SIS Ventures is likely to seek exits for investors after between seven and ten years. By that stage, he hopes, the purpose would be “integral to the DNA” of organisation and the “mission can’t be dropped”, with the investor also having achieved a return by that time.

But he added: “This focus for us on the more commercial, mission-driven space does represent a shift in the market, but that doesn’t mean we are moving away from our traditional support for charities, social enterprises and social enterprises in Scotland. That will remain very much a key part of what we do.”

Six Questions

What countries have you most enjoyed travelling to, for business or leisure, and why?

I’ve enjoyed time both studying and holidaying in the USA and enjoy visiting many friends there.

When you were a child, what was your ideal job? Why did it appeal?

I always wanted to be an architect and still retain an interest in art, design and the built environment.

What was your biggest break in business?

Undoubtedly being appointed CEO of SIS in 2011 when I was 31. I’ve honestly never looked back.

What was your worst moment in business?

Four years ago one of my team was killed in a car accident on a way to a meeting in Inverness. We will never forget this moment as a team, and we will never forget her.

Who do you most admire and why?

Michelle Obama. I was lucky enough to hear her speak in Edinburgh when she visited. I love her values, her resilience and admire her family values.

What book are you reading and what music are you listening to?

I’m currently reading Ray Perman’s ‘The rise and fall of the city of money: a financial history of Edinburgh’ Ray was the first Chairman of SIS. Dua Lipa’s new album normally kicks of my day whilst working from home at the moment.

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