In October 2024 Wellers Law Group successfully registered Water Unite as a charity with the Charity Commission. Water Unite are a grant-maker but also invest into a social investment fund ‘Water Unite Impact’, a fund established by Water Unite and Wellers’ investment management arm, Wellers Impact, which makes investments that align with Water Unite’s charitable objects.

Background

To give some context to this registration, in 2014, the Law Commission published a report on social investments being undertaken by charities following concerns regarding perceived “legal barriers” in the sector.

These barriers included cases such as Cowan v Scargill (1985) in which the High Court held that trustees must prioritise the “financial interests” of the beneficiaries above ethical considerations as well as the lack of an explicit statutory power allowing charities to make investments for both financial return and to achieve a social outcome.

The Law Commission’s report confirmed that this context had led to a “chilling effect” on trustees’ willingness to invest in social enterprises and recommended that a new power be granted to charities to specifically allow them to make social investments. As a result, the Charities (Protection of Social Investments Act) Act 2016 was enshrined in law.

The 2016 Act and other initiatives within the sector have led to considerable growth in the social investment space, with the value of the UK social investment market rising from around £830 million in 2011 to over £10 billion in 2023.

With this significant growth and the opportunities these afforded, Water Unite approached our firm and Wellers Impact, to establish both:-

  • Water Unite as a grant-making charity with the charitable purposes of tackling global water poverty, supporting sanitation projects and reducing plastic pollution in developing countries; and
  • A social impact fund (Water Unite Impact (WUI)) that invests in Small to Medium sized Enterprises (SMEs) globally, including the Global South, with the aim of both achieving both a financial return and furthering Water Unite’s charitable purposes.

WUI was to be established on a blended finance model, whereby Water Unite and other grant-making Charities would, through their investment, take on a greater level of risk (‘Catalytic Capital’) so as to attract Development Finance Institutions (DFIs) and other institutional investors, who ‘but-for’ the Catalytic Capital would not otherwise invest in WUI and make other social investments (the ‘But-For Principle’). 

Flow of Funds Structure

We structured Water Unite and WUI so that:-

  • corporates and individuals can make donations to Water Unite and obtain the relevant tax benefits in doing so. Water Unite looks, in particular, to attract donations from retailers through a micro-levy on sales of goods.

For example Co-op, Robinsons and Elior (amongst other – see a full list of Water Unite’s corporate partners here) have pledged a donation of 1p from every bottle of water sold;

  • Water Unite, charities, DFIs and other institutional investors can invest in WUI to both achieve a financial return, create impact in furtherance of WU’s objects and use those returns in furtherance of their own purposes;

Flow of Funds illustration:

Flow of funds 1

Decision Making Structure

With regard to decision-making powers, Water Unite and Wellers Impact entered into an agreement (the WUI Agreement) whereby:-

Water Unite have the right for individuals with the relevant skills and experience to attend WUI investment committee meetings with the purpose of:-

  • ensuring that investments being considered, further WU’s charitable purposes; and
  • reporting the social impact achieved by WUI back to the WU Board of Trustees.

decision making structure

Outcome

Water Unite achieved charitable status in October 2024 and WUI have as of today’s date made onward social investments in some of the following small to medium sized enterprises (SMEs):-

outcome

To further describe the activities of one partner, Jibu pairs financing with an innovative franchise model to empower entrepreneurs to provide clean drinking water for their communities.

With decentralised, on-site production, Jibu franchises are able to sell high volumes of water directly from their retail points to end-customers across Rwanda, Uganda, Kenya, Ghana, Tanzania, DRC, Zambia and Burundi.

For further information please see Water Unite’s Impact Report here

We are also very pleased to announce that the US International Development Finance Corporation (DFC) have made a commitment in principle of US$7.5million to WUI US Government Backs Water Unite Impact to Fund the Water Sector’s Missing Middle in Emerging Markets exemplifying that the But-For Principle is achieving its purpose. We wish Water Unite well for the future and continue to provide ongoing legal support.

If you are looking to establish a Charitable Foundation with an innovative financing model or an existing Foundation looking to undertake social investments, please do get in touch.

Contact Peter Spencer on 020 7481 6390

Or email enquiries@wellerslawgroup.com