As Bridges marks its 20th anniversary, we talk to co-founders Michele Giddens and Philip Newborough about the evolution of their business and the impact investing sector as a whole
- Bridges Fund Management was established 20 years ago with the aim to mobilise capital into investments that impact positively people and planet
- Founded by Sir Ronald Cohen, Michele Giddens and Philip Newsborough, the firm is widely recognised as a pioneer in impact investing and has a played a crucial role in building the sector
- Today, it manages over £1.4bn (€1.65bn) across four different investment strategies: property, sustainable growth, long-term capital and outcomes contracts
- The team’s impact thesis is aligned with the UN SDGs and focused on four key themes: sustainable planet, healthier lives, future skills and stronger communities
At a recent gathering in London to celebrate the 20th anniversary of Bridges Fund Management (Bridges), Michele Giddens, the firm’s co-founder and co-CEO, said it all started with an idea and the right people.
The idea was to investment in businesses providing solutions to some of the most pressing social and environmental challenges. The people were Giddens, Philip Newborough and Sir Ronald Cohen.
Launched in 2002, the firm is widely recognised as a pioneer in impact investing, and the ability to attract talent has been instrumental to its success so far.
From the start, Bridges’ intention has been to not only mobilise capital into investments that impact positively on people and planet, but also to encourage others to follow suit.
“We’ve always had these two parallel goals – one was to show leadership by building a successful investment firm, and the other was to really try and influence the market in terms of using capital as a force for good. If we really want to tackle inequality and the climate crisis, we need to do both,” says co-founder and co-CEO Philip Newborough.
Newborough recalls meeting Giddens in 2001 and launching their first sustainable growth fund a year later. “This was a few years before impact investment was even a thing, so we were really pioneers at the time.”
From growth funds to outcomes contracts
From that first fund, Bridges has grown to become a multi-strategy fund manager. Today, it manages over £1.4bn across four different investment strategies: property, sustainable growth, long-term capital and outcomes contracts.
The urgent need to transition to a more sustainable and inclusive economy has framed everything Bridges has done over the last two decades, Newborough adds.
“Over the last three to four years the market has really come to accept this idea. We are in a position now, whether it’s in our property or growth funds, where we have a real origination advantage. Entrepreneurs and joint-venture partners want to work with us because they see we’ve been leaders in helping our partners to articulate and derive value from their impact.”
Bridges’ first sustainable growth fund raised £40m, half of which came from the UK government. At that time, the fund’s impact focus was on creating jobs and opportunities in the most deprived areas of the UK. “Investments in the first fund were quite small and I think people were surprised in terms of how well we did, both financially and from an impact point of view,” says Newborough.
The next big moment came in 2007, when Bridges raised its second growth fund. At £75m, it was nearly double the size of its predecessor, with all the capital raised coming from the private sector.
In that same year, the Bridges Impact Foundation was created with the double objective of protecting the firm’s mission, while also achieving impact via the use of philanthropic capital – in a way that would inspire and engage the Bridges team. The team donates 10% of the profits from their investment funds to the foundation.
As the company grew, its impact thesis also evolved and expanded, moving away from the original geographical approach of investing in underserved areas, and instead focusing on four key impact themes, closely aligned with the UN Sustainable Development Goals (SDGs): sustainable planet, healthier lives, future skills and stronger communities. The sustainability theme has been a particular focus in the last few years.
The firm’s portfolios have also become more international over the past decade: “That’s one of our big strategic goals,” Newborough says. “Currently, our intention is to invest 20 to 25% of our portfolios outside the UK.” Non-UK investments include Viva Gym Group, a low-cost gym with sits across Iberia and is currently Bridges’ largest growth capital investment.
Bridges was a pioneer in the low-cost fitness space in the UK, having co-founded The Gym Group in 2008. The Gym was the first of Bridges’ portfolio companies to reach IPO stage, floating on the London Stock Exchange in 2015 at a £250m valuation.
“It’s been a long journey, not just for Bridges but for the sector in general. It took some 15 years to gain momentum. As a pioneer, it would have been nice if the whole market had started to scale five or 10 years earlier.”Philip Newborough, Bridges
In 2009, Bridges raised its first Social Entrepreneurs Fund, responding to the need for social enterprises to access the same kind of risk capital. It was thanks to working closely with social sector organisations in this fund, that the team turned their attention to the potential of social outcomes contracts, an evolution of the social impact bond concept.
This led to the launch in 2013 of the world’s first fund entirely dedicated to investing in outcomes-based contracts. Since then, Bridges has supported over 60 social outcomes contracts, or partnerships, working with some 40,000 individuals.
In June, the company announced the final close of its fifth sustainable and impact-driven property fund at £350m. This SFDR Article 9 (‘Dark Green’) fund is 60% larger than its predecessor, and will invest in sectors including lower-cost housing, low-carbon logistics and healthcare accommodation.
Bridges’ investor base is now 80% institutional, primarily pension funds but also insurance companies, family offices and university endowments.
Giddens refers to the ‘Innovation Adoption Curve’ model to explain how the conversations with existing and potential investors have evolved over the years. The curve classifies adopters of innovations in different categories, from innovators to early adopters, all the way to mainstream. “Bridges was certainly an innovator, and I would say that three to five years ago, [the sector] entered the early mainstream in terms of the adoption curve.”
She says that investors’ perceptions about impact investing have changed as the sector moves into the mainstream. Questions are no longer about why impact should be managed and measured, but more about the best ways to do so. “And that’s just really a fantastic transformation in the conversation,” she says.
Bridges has played a pivotal role in building the sector and providing the right foundations for it to grow further. Its ‘Spectrum of Capital’, which maps out the broad range of risk/return strategies within sustainable and impact investing, is widely used across the industry.
The firm channels most of its field-building efforts through its non-profit Bridges Insights which focuses on collaborative projects and thought-leadership. In recent years, much time and effort has been dedicated to the Impact Management Project, a ground-breaking initiative launched in 2016, which concluded at the end of last year.
“It brought together over 2,000 asset owners and asset managers globally to build a consensus about what really are the fundamentals of impact investing,” says Giddens. “And that resulted in some really important progress towards global standards for impact accounting and analysis.”
“It’s incredibly welcome to see the momentum that has been building in the last three to five years. But if you look at issues like climate change, it is definitely still not enough. To solve the challenges we face, that momentum needs to keep growing very, very rapidly.”Michele Giddens, Bridges
Three years ago, the firm launched Bridges Evergreen to provide long-term patient capital to highly impactful businesses. “Whereas the sustainable growth funds take a more traditional private equity approach, typically taking controlling stakes and exiting withing four to five years, Evergreen has a more flexible mandate and can hold our investments for as long as is necessary,” Giddens says.
She adds that future plans include the development of an impact bond fund in emerging markets, taking Bridges’ “leadership in outcomes-based investing internationally, which is really exciting”.
Looking back over the last two decades, neither Giddens nor Newborough have any regrets other than perhaps the time it took for the sector to take off. “It’s been a long journey, not just for Bridges but for the sector in general,” says Newborough. “It took some 15 years to gain momentum. As a pioneer, it would have been nice if the whole market had started to scale five or 10 years earlier.”
Giddens adds: “It’s incredibly welcome to see the momentum that has been building in the last three to five years. But if you look at issues like climate change, it is definitely still not enough. To solve the challenges we face, that momentum needs to keep growing very, very rapidly.”
She concludes by adding that a key focus for Bridges at the moment is on solutions that facilitate a just and inclusive transition to a more sustainable economy. “We are looking not just at the reduction of carbon, but also at how we include those populations that are in danger of being marginalised during that process.”
Note: Paula Garrido worked at Bridges Fund Management between 2012 and 2014.