As part of our twentieth anniversary celebrations this year, Resonance published a book of its journey since 2002 and many people and organisations that have been part of our story contributed.

Danyal Sattar, who has been involved in social impact investment for many years, describes how he first came across Daniel and Resonance and how their journey as peers spans the last twenty years.

I’ve been around this space for a long time now – coming onto three decades. I’d started out working for a little think tank, as it was then, New Economics Foundation. We were out there to change the economic system and get more in line with the planet. That need has not changed. After five years it was time to move on and I followed people who were looking to move money more directly to support the causes and changes we sought. Tessa Tennant was chairing UK Sustainable Investment Forum and Pat Conaty, setting up Aston Reinvestment Trust (ART).

How do you replicate it?
That was my first connection to Resonance, though I did not know it at the time. As Steve Walker, Pat Conaty and many others were getting ART going, and I was making my first loan assessments of my career, along came Bob Paterson. Bob looked at what we were doing at ART and asked us what we were doing to replicate it. We all probably looked a bit fraught at that prospect. We hadn’t even got ART going yet at that point, and here was someone asking us about our replication plans. Bob, irrepressibly, with all our support and good wishes, took on the replication job, and rolled out a number of early replication community development finance institutions. Bob also got the community land trust bug from Pat, who brought the concept across from the States and promoted it. Bob got on with replication and set up Community Land & Finance (CAF) as a vehicle to take this forward.

Years on, Bob Paterson and Daniel Brewer merged their efforts, and put them under Daniel’s organisation, Resonance. That is when I first really got into contact with Daniel. By this time, I’d spent a bit of time working on the continent, and back to work for Malcolm Hayday in the early days of CAF’s Investors in Society which converted into Charity Bank. I moved across to a funder, Esmée Fairbairn Foundation, and up popped Daniel Brewer and Resonance.

This was a classic financing solution
Daniel was on that journey – he’d raised some initial investment funding, to buy property for people with learning disabilities, in a project called Mustard Seed Property and was looking for a more coherent solution. Could a community development financial institution (CDFI) or a Fund, be set up to do the job? Over the years at Esmée, we were lucky enough to invest in a good few things Daniel and Resonance came up with. While the big ones were the Real Lettings Property Funds, which we backed, the one I liked the most I think, was the Community Shares Underwriting Fund. It was a great idea. Community share issues are when a local community forms a cooperative for the benefit of the community and issues shares to fund a local project. It might be buying the local pub, or reviving a long discussed weir into a micro-hydro scheme, or putting solar panels on school roofs. Gradually, a pattern emerged. Get to 65%-75% of the say, £500,000 needed, and you find the project almost always raises the full amount and is successful. It just takes as much time to do the final quarter or third as it did the majority of the funding. And in the meantime, the project cost may increase. This was a classic financing solution – lend the money on slightly more expensive terms than the share issue itself, to incentivise continued share raising, and allow the project to go ahead now. Typically, that’s all that is needed to get the last few investors over the line – the certainty that the project would actually happen. “It will never happen – but if it does, I’ll put my money in” – and the Community Shares Underwriting Fund solved that problem. A number of foundations, and then Big Society Capital came in.

“Daniel Brewer Clauses”
It was around that time that Resonance was developing the Real Lettings Property fund concept and another key person in our sector had an influence, Stephen Lloyd. He was at that time, managing partner at Bates Wells (Bates Wells Braithwaite as it was at that time). I was looking at the Community Share Underwriting Fund, and I ran it past Bates Wells for legal advice. Set up something called “fund” and attract multiple investors and make multiple investments and well, it’s either the FCA or the PRA as a regulator and better make sure it is one or the other! So time for a bit of legal advice, I thought. I was somewhat surprised on the call, when Simon Steeden, our lawyer at Bates Wells, said “Just a moment, Danyal, I’m going to get our managing partner on the line,” and Stephen joined us. Stephen was such an influential figure on the development of the legal structures that support social enterprise today. I’d known him over the years, and expected nothing but kind words for Resonance’s new initiative. I got the hairdryer from Stephen – “They cannot raise money with a document like this” he thundered down the phone at me. Thanks to his intervention, as funders we worked with Resonance to make sure their documentation was just as good as anyone from the commercial world. One of the many ways Stephen Lloyd helped many of us in our sector over the years, albeit at the forceful end this time! Simon Chisholm joining Daniel Brewer was a big part of that transition.

And on the legal side, it was Resonance that led to what I called the “Daniel Brewer Clauses.” Daniel and I were running through some legal documents, and as is common, there was a key person clause. “I’m not going anywhere” was Daniel’s view, “Why do we need this clause?” “Well, it is there so we can have a say over your replacement, if and when that’s necessary.” “Why can’t I have that over you,” was Daniel’s instant response. “If people are important, then who is on the other end of the investment from my perspective, is just as important as I am to you.” Good point, I thought. We ask a lot of our investees. Not just a key person clause, but management information, accounts, impact reports, meetings. It goes on. It is a bit one way. Could we not make it more equitable?

I asked our lawyers at the time, who perhaps predictably, shuddered. “What if you forget to send something to them – you’d be in breach of your investment agreement.” That was rather the point, I thought, but a firm of lawyers advising us, was not going to do something so obviously in favour of the party who in commercial terms was the ‘other side.’ In the end, I stuck these things in the offer letter – that the investee would receive a copy of our annual report and accounts, that we’d send them an impact report on how our impact portfolio was doing overall. That they had the right to speak to me, and on request, our Finance Director. That they could ask to speak to our CEO (at that time that was not me), and they could request to speak to a Trustee (but I could not guarantee that).

I cannot say that kind of offer letter endured past my tenure in that investment role, but it’s the kind of thing we ought to be doing. It feels more equitable. And that is what we should be practicing. Practice it enough times, and it becomes the new normal. And perhaps, in another twenty years, we won’t be having to invest in a new Resonance, or Big Issue Invest, or any other of the organisations we’ve had to set up and run, to put money to a better purpose.