Esmée Fairbairn Foundation’s first social investment was made in 1997. Since then, we have formalised and grown our social investing. We have made over 170 social investments through our £45m social investment fund, the returns of which are recycled.

We practice an ‘impact-first’ approach. We start with the social need and tailor our investment: adapting and selecting financial instruments that are most appropriate.

Invariably, when we talk about co-designing social investments, we land on the importance of being patient and flexible. Principally, our approach to co-design is driven by a belief that we – as investors – must focus on the social organisation’s need and not our own.

Here, we shine a light on three forms of social investment to help demonstrate how an impact-first and flexible approach can be applied in the design: equity and convertible notes, bridges loans and impact-linked loans.

Equity and convertible notes

Equity is the raising of investment through the sale of shares. Convertible notes are loans designed to convert into equity upon a future trigger event (usually a future investment raise). This means the business can gain a track record, which (hopefully) increases the value of the company and avoids the founders from selling too much ownership too soon. In exchange, the investor is given a discount on the price of shares.

Although equity and convertible notes are long-term, patient and flexible sources of finance, selling shares means a selling of partial ownership, and hence control, of the company. In the case of convertible notes, although the expectation is that a company’s valuation increases with time – which reduces the founders’ ‘dilution’ – this is not guaranteed.

In late 2019 we invested into Mission Kitchen – a food coworking space seeking to address barriers to entry to food entrepreneurship and embed sustainable food practices. Mission Kitchen – a Company Limited by Shares with specific social provisions in their governing documents – secured favourable, long-term leases for their first premises. In order to launch, they required significant upfront capital as well as having future cash availability for growth. Loan finance was difficult owing to a lack of financial track record and no security (leasing rather than owning buildings). Equity finance was possible given the legal structure although we were conscious of significant dilution and loss of control of the founders while the business had a relatively low valuation – owing to its early nature. We made a £375,000 investment: £125,000 in straight equity – addressing the need for upfront capital; £250,000 in a convertible note – addressing the need for future cash availability. Mission Kitchen could draw down from the convertible notes over a 2-year period. If chosen, rather than convert our notes into equity, we could receive repayment; these notes can be ‘redeemed’ by taking a share of Mission Kitchen’s operating profit above £100,000.

Bridging loans

A bridging loan is used to fund a short-term shortfall until – usually guaranteed contracted – revenue is received. This is a form of short-term finance to provide cashflow to enable work to take place. Its low risk nature should result in lower interest rates. However, it is still debt and investees and investors would need to consider the perceived certainty of the source of repayment and if any penalties exist if this source of repayment falls through.

In 2018, we made a £1.8m facility available to the Rivers Trust – an umbrella organisation for 60 Members Trusts who work to protect, promote and enhance the river environment. Trusts receive the majority of their income to enable their work through the Defra’s Water Environment Grant. This poses a challenge given that these payments are made in arrears meaning smaller organisations who don’t have the upfront capital to do the work are unable to proceed. By working with the Rivers Trust umbrella body we co-designed a facility which enables member Trusts to receive upfront capital from our facility, who then repay as soon as they receive Defra’s payment.

Impact-linked loans

An impact-linked loan links repayment to pre-determined social impact performance. In doing so, it aligns investors and investees to the desired impact by offering a financial incentive to create long-lasting impact. Although theoretically ideal, these instruments can be complex, time consuming and costly to create and there’s a need to ensure genuine alignment between investor and investee, whilst ensuring that the pre-determined impact performance metric drives long-term sustainable impact, rather than short term behaviour shifts.

In 2020 we made a £250,000 impact-linked investment into Hubbub – a campaign creating organisation who seek to inspire greener living – to fund a Climate Emergency Campaign in Manchester. This campaign is due to be funded by local business contributions, yet fundraising is easier once potential contributors can see the impact of the campaign in action. As such, our money underwrote the campaign: enabling it to run without delay and our repayment is received from local business contributions. We, and Hubbub, were hoping to see a successful campaign which would spread to other Local Authorities. To further incentivise this spread, our interest rate reduces (from 4% to 2%) if the campaign is adopted by one other Local Authority.

To learn more about our approach to social investment, visit:

Ben also delivered an exclusive webinar for Social Enterprise UK members looking into common forms of social investment in more details as well as taking a deeper look at some of the deals mentioned in this blog. SEUK members can access the webinar here. For more information on joining SEUK as a member visit