Social investment and innovation tackling the poverty premium

The ‘poverty premium’

People in poverty or on low incomes pay on average £490 more each year for the same goods and services as people who are better off financially. For example, pay as you go energy tariffs are higher than tariffs for those paying by direct debit. For 1 in 10, this number is at least £780 annually, and some low-income households can end up paying £2,250 per year when high-cost credit is factored in. This is the ‘poverty premium’, the extra cost of being poor, and its price is over £2.8 billion per year in the UK alone.

Supporting companies tackling the premium

The £15 million Fair By Design fund managed by Ascension was set up to invest in scalable companies tackling the poverty premium. The fund achieves its mission by investing in early-stage, highly scalable technology businesses working to reduce costs across the target sectors of fairer credit, insurance, food and household goods, energy, and transport. The fund looks for innovations that can grow at the pace of typical venture-backed business, whilst tackling both the drivers and effects of the poverty premium.

Impact of Fair By Design

The fund has made investments in 25 ventures which are developing solutions to the poverty premium across a range of goods and services. Across all of its venture investments, Fair By Design helped reduce the poverty premium by around £283 million for 2.6 million people in the UK (averaging £99 per person) by the end of 2023. Examples include:

• More than 1,000 employers make work more rewarding, by offering financial benefits with Wagestream (BCorp). Three million team members at companies like Asda, Bupa and Burger King use Wagestream to manage their budgeting, choose when they get paid, build up savings, get free financial education, save money on their bills, and more, all in one app.
• Switchee’s (BCorp) digital smart meter and data service enables social housing landlords to better manage homes and maintenance budgets to improve resident wellbeing and also enables tenants to save directly on energy costs.

JRF’s investment: £3 million investment into this social impact fund was completed in 2016.

Investee Emma Steele, Partner at Ascension said:

“The investment helped us catalyse the venture ecosystem around impact investing, proving that high returns and positive impact can coexist. Through collaborations with corporates, foundations, and social organisations, we’ve helped founders refine their missions on tackling the poverty premiums and effectively reach their target audiences, scaling both impact and commercial success efficiently.”