We invest in order to finance our charitable work. We use a range of sustainable investment approaches with different financial and impact goals to support our work.
The following table reflects the different approaches Esmée uses (our spectrum of capital), with more detail about each approach below.
Grant funding
Our total annual budget for grant-making is around £40m to £50m, which is spent towards our strategic aims and priorities. This includes funding organisations advocating for systemic change in the investment system as well as support to secure more money for nature's recovery.
Our Board of Trustees regularly review our funding budget - balancing the need now with the likely need in future. Our budget is linked to the value of our endowment; we spend around 4% on grants and operational costs. To account for volatility in the market, we calculate the 4% based on the performance of our investments over the previous five years.
Social investment
We have a £60m allocation for social investments, where our approach is impact-first, and financial returns are secondary. We use social investment to support our strategic aims and priorities whilst also supporting the development of the social investment market. This includes investing in new, innovative and alternative social and environmental models, such as a Land Purchase Facility and quasi equity products.
Together with Environmental Funders Network, we hosted the Environmental Finance and Learning Fund, a three-year initiative to build confidence and skills in environmental investing, and increase the amount of funding for impactful environmental projects
In 2024, we approved 16 investments including: Resonance to help leverage capital into the UK social enterprise sector, We Are Juno towards the children’s residential care in Liverpool, and Câr-y-Môr, a community-owned seaweed farm, for a new seaweed refinery to support them to become more financially sustainable.
Impact investing
We have a £10m allocation for impact investing, which we use to test the potential to achieve market-like returns by investing into impact funds that align with our aims, and which generate a measurable impact.
In 2024, we shared our thematic approach to impact investing and published our first in-depth investment report, which explored sustainable food and agriculture. We also approved two investments: Schroders Capital for a Fund to reduce inequality, and Eka Ventures for a Fund investing in founders creating positive systems change.
Enhanced sustainability funds
5% of our investment portfolio is allocated for funds looking to achieve enhanced environmental, social and governance impact alongside a market rate return. We use it to invest in funds that wouldn't normally make it into our main investment portfolio due to their small size, focus or risk profile.
In 2024, we invested in a fund providing debt capital to projects in emerging markets which align with the green transition. We also supported a fund-raising by one of our existing managers specialising in sustainable assets in industries such as water, transport and agriculture.
Main investment portfolio
We work with our advisors to identify funds which focus on sustainable investing and have steadily increased the proportion we would classify as best-in class managers. As well as targeting net zero carbon in the portfolio by 2040, our Trustees have now agreed a sustainable approach across the whole portfolio. And in 2023, we updated our Investment Policy Statement to better reflect the fact that we want to take sustainability considerations into account in every investment decision.
We aim to be proactive asset owners by engaging with companies on issues that are aligned with our funding priorities. We work with other foundations and investors to look for opportunities to promote corporate behaviour which is in the interests of long term shareholders and we join various collaborative investor engagement initiatives where they align with our strategic aims. For example, in 2024, we joined an initiative encouraging UK companies to pay the Living Wage.
