The Big Exchange: A new platform for impact investments

The Big Issue, a magazine sold by the homeless as a route out of poverty since the early 90s, is a common sight on UK streets.

Now, the people behind its success have an ambitious plan to bring impact to the masses with the likes of Aberdeen Standard Investments, Columbia Threadneedle and Alliance Bernstein involved.

The Big Exchange, an online platform giving retail investors easy access to impact investments, is launching this year.

It has been a long-term ambition for Nigel Kershaw, who chairs the Big Exchange and the Big Issue Group which includes Big Issue Invest, the impact investment arm of the Big Issue. He says financial inclusion has always been in the Big Issue’s DNA since its birth.

Kershaw explains: “When the Big Issue started it was always about a business-like solution to giving people an income, dignity, work and self-esteem; rather than having to beg or steal. At that time in the early 90s the streets of London were full of rough sleepers, fuelled by crack cocaine, which makes people pretty violent.

“So between 30-50% of our vendors were being robbed on the streets, mainly by other homeless people. So what we did was give vendors a ‘passport’ and kept their money in a safe overnight.”

Kershaw says the Big Issue Group is one of the most focused organisations on financial inclusion for vulnerable people in the UK. This starts with its Big Issue magazine vendors. But also includes working with mainstream finance. In 2001 it worked with HBOS bank in Scotland to set up the first basic bank accounts for homeless people and the vulnerable with no stable address.

And through its impact investment arm, Big Issue Invest, it has made a string of innovations.

This includes the UK social bond fund in partnership with Columbia Threadneedle that celebrates its fifth anniversary this year. It was the first social investment fund in the UK to offer daily liquidity and has raised over £100m. Last year, Big Issue Invest launched a UK equity impact product with Aberdeen Standard Investments focused on ‘good employment’ in UK quoted companies, with metrics such as paying the living wage and workforce development.

It has also worked with consumer credit company Experian on initiatives that allow people to improve their credit score through paying rent on time, alongside a number of social impact loan funds.

Kershaw says the Big Exchange continues this culture of financial inclusion by changing the hearts, minds and behaviour of people by letting them take control of their finances and participate in the impact investment market.

The initiative is being headed up by Jill Jackson, who joins from four years at Aberdeen Standard Investments as Head of UK Retail & Distribution Support. She thinks the time is ripe for the investment platform. “ I really think there is a change in attitudes. I’ve seen that in my previous role with people asking questions they’ve never asked before. Really specific questions about a stock “because they’ve been reading about it and don’t like the way they treat their staff. So they don’t want to hold that”. I’ve never been asked questions like that. But in recent years people are starting to believe they are able to influence outcomes in a different way than they ever had.”So what is the Big Exchange? It has raised £1.9m (€2.2m) from founding investors. It will offer people the opportunity to make an impact investment through their Individual Savings Accounts (ISAs are a UK financial product allowing people to save or invest up to £20,000 tax-free annually) or a general investment account.

The minimum investment is £300 or a monthly payment of £50.

So far it has commitments from 11 founding partners including Aberdeen Standard Investments, Alliance Bernstein, Alquity, Columbia Threadneedle, Ecofin, Pictet, Quilter, Stewart Investments, UBP and WHEB. There will be around 40 social, environmental and impact funds on the platform at launch.

The Big Exchange also includes a “social passport” where people can see their impact recorded and visualised. Its impact methodology, devised with 3D Investing, is mapped to the UN Sustainable Development Goals.

Kershaw adds that Big Exchange has had “incredible corporate support” from the likes of professional services firm Deloitte and lawyers Herbert Smith Freehillls.

The Big Exchange also hopes to draw on the brand power of the Big Issue to draw in the public. It sells over 78,000 copies a week and over 400,000 people read it every week.

The target is to raise £227m from over 20,000 investors by 2020.

The Big Exchange will have an investment committee chaired by Chris Ralph, chief investment officer at St James Place, and a social advisory committee that must have consensus on investments.

It is also planned that the Big Exchange will lock in its social mission and have a mutual element where customers will have some ownership.

It comes as there is growing focus to get retail savers allocating to impact investment A government-backed taskforce led by Allianz Global Investors Vice-Chair Elizabeth Corley is seeking to grow a culture of social impact investment.
Big Issue Invest is involved in the Corley taskforce, as are many behind the Big Exchange, including Columbia Threadneedle, Aberdeen Standard Investments and Square Mile Research.

Kershaw says: “We’ve gone out and done it. We’ve walked the talk.”

As well as effecting change with the public, Kershaw also thinks the platform could nudge asset managers.

He explains: “We were going through the methodology of our social advisory committee with one asset manager. We told them transparency is key. For example, a lot of funds list the top 25 holdings and we don’t know what is underneath that. They decided to immediately list all their holdings. We are creating behavioural change within asset managers themselves.”

Overall, Kershaw says the Big Exchange extends the Big Issue Group’s aim to tackle poverty through self-empowerment. “We are providing a market place where people can take control of their finances and make decisions about what they are going to do with that money whether it is from one pound to one hundred pounds.”

Nigel Kershaw OBE will be speaking at RI Europe 2019.