Esmée Fairbairn’s Mason: “We need a fundamental change in how we run the global economy”

Valued at £1.4bn, the Esmée Fairbairn Foundation focuses on grant funding and social investments aimed at improving the natural world, secure a fairer future and strengthen the bonds in communities across the UK

Ian Fairbairn pioneered the UK’s unit trust industry and rose to become chairman of the UK investment giant M&G Investments. In 1961, he gave part of his considerable stake in the company to create a foundation in the name of his wife Esmée, who’d been killed in a wartime air raid in 1944. 

The foundation has made grants of more than £825m (€958m) since then. CEO Caroline Mason tells Impact Investor: “We work on the spectrum of capital and use whatever is the right tool to achieve the right purpose. That might be impact investment, it might be endowment, or it might be social investment. Even a small investment can have a very catalytic effect.” 

Mason started her career in financial services but in 2005 decided to move into social investment, co-founding Investing for Good.

“Financial services had changed dramatically and become quite toxic. I didn’t want to make rich people even richer. Rather, I wanted to see how capital could be used to have positive impacts.” Caroline went on to become chief operating officer of the UK’s leading impact investor Big Society Capital. 

In terms of her mission at Esmée Fairbairn, Mason asserts: “We’re all about change rather than amelioration. Fundamentally we’re trying to change systems that are not working in our three key areas of focus.”  

These include the improving the natural world, securing a fairer future, and strengthening the bonds in local communities “We’re looking to disrupt existing systems and to innovate new methods of working.”  

“More than the sum of our ambitions” 

The foundation is now valued at some £1.4bn (€1.63bn) and dedicates around £50m a year to grant funding, and another £50 million to social investments.  

Mason explains: “We have four different buckets we’re investing in. Firstly, grant making, where we have zero target return. Secondly, social investment where we seek a return of only 2 to 3% per annum. Thirdly, impact investing where we seek a high return, something like 6 to 8%. And finally, responsible investing where our ambition is to get a return which is 4% above inflation – something that is obviously becoming more ambitious lately.” 

The foundation has an advisory relationship with Cambridge Associates who Mason says acts effectively as their chief investment officer.

In general, partnerships are crucial to how the foundations work. “Clearly, as a small organisation of just 38 people, we don’t have a large research team but rely heavily on knowledgeable experts who lead on different subject areas within the team. These are almost like commissioners who go out and find the right kind of support.” 

“If we need research then we go out and have that done, sometimes using university or specialist consultants, sometimes speaking to practitioners themselves.” An example of the former was the foundation’s recent work with the University of Cardiff to produce a research paper on freshwater.  

Mason says: “We always work with partners. We look to work with campaign organisations who are looking to change systems that are not working. We have clear expectations of what we want to achieve, and we find partners that wish to find the same outcomes that we want but are perhaps doing things that we don’t do at the moment. By working with partners like that, we ensure that we are more than the sum of our ambitions.” 

The Foundation’s partners can be in the public or the private sector. For example the Foundation worked with the Green Finance Institute on developing ways to develop green finance. “We have something like 800 individual organisations we support or give money to, and we are working with around 50 different partners.”  

Showcasing successes  

Mason chooses three beneficiaries she is particularly proud of supporting which also show how investments can evolve. 

The first one is called B4RN (Broadband for the Rural North) which focuses on expanding access to the internet. “We made an investment of only 300,000 pounds and we have seen this transition from a volunteer organisation to being completely self-sustaining, and one of the biggest broadband providers for rural areas.”  

Secondly, Mason cites the Wyre valley project where she says she “is looking for environmental outcomes investing alongside water companies and farmers who want to see better outcomes on their land. This is a model we hope to replicate elsewhere”. 

Finally, Mason draws our attention to Resonance. “This started with a grant and then we went on to be their first investor.” Resonance works with social enterprises and charities to help them raise capital from like-minded investors. “They have a range of investment funds to support work that is tackling social issues including homelessness, poverty, community-led projects, health and wellbeing and education.” 

The future 

In Mason’s opinion we are reaching a tipping point. “I’m not sure we’re collectively stepping up to the challenges coming down the road. The scale of those challenges whether in biodiversity, climate, pollution, or problems of equity, is just huge. We need a fundamental change in how we run the global economy and we need to speed that up.” 

“For our foundation, we are able to do that by taking risks which others cannot. And also by seeking to influence people. We like to talk about ‘influencing through practice’ – showcasing how innovations might work in the real world. We consider this quiet influence.” 

In terms of ‘loud influence’, the foundation is also doing plenty in its position as an asset owner using engagement and shareholder activism. It works with various shareholder action groups, and groups such as Client Earth, which is focused on using the law to protect life on earth. 

Mason believes this is a “pivotal time’ for the impact investing industry. “Extraordinary things are happening, such as the recent €1 billion regenerative farming fund. The more we can build impact with investment capital the better.”  

Mason concludes with a quote from a friend, the head of campaigns at Tesco, who “very wisely said we should not stand around saying ‘it’s for government to do something, nor that it’s for finance to do something, nor even that it’s for consumers to act. It’s for all of us to do something, all of the time.”