A fund that will give your investments some social impact

A new socially responsible investing trust backed by blue-chip investors allows investors to do well from doing good.

Before environmental, social and governance (ESG) investing came along there was SRI: socially responsible investing. Whereas ESG tries to be many different things, SRI involves investing in local communities, charities, and social enterprises and achieving a direct, measurable impact. You should also, hopefully, make a profit.

Big Society Capital, a major player in this sector, estimates that the investable high-impact segment of the UK market will be around £10bn-£15bn by 2025. Perhaps the most prominent securities in this context are retail charity bonds, which are issued by leading charities and listed on the London Stock Exchange. 

A blue-chip partner

However, funds are also getting in on the act. Big Society Capital is behind the biggest new fund structure to access the social-impact sector, the Schroder BSC Social Impact Trust, which is about to be listed. This is in effect a partnership between Big Society Capital and blue-chip fund manager Schroders. 

This proposed new listed fund is looking to raise £100m and is targeting a return of inflation plus 2% per annum, with a low correlation to traditional quoted markets. There will also be an income payout of around 1%-2% once the portfolio is fully invested. Around 40% of the fund will be invested in property-based schemes. Typical of this is a portfolio investment called Resonance Real Lettings Property Fund – a partnership between specialist Resonance, a social-impact investment group, and the homeless charity St Mungo’s. This vehicle acquires homes for St Mungo’s. As of March 2020, 903 tenants were housed in 259 properties. It has a 3% target yield. 

Another 40% or so of the fund will consist of lending to charities. It comprises an interesting range of investments, including a £16m portfolio of retail charity bonds managed by Rathbones, as well as direct loans. Typical of the latter approach is an investment alongside another big player in this sector, Charity Bank. 

The last segment of the portfolio (around 20%) is arguably the most ambitious: social outcomes contracts. These are innovative structures whereby investors only make a profit if there is a beneficial social outcome. A good example is a sub fund called the Social Outcomes Fund II, which has committed to support two Stronger Families outcomes contracts in Suffolk and Norfolk. The idea, says the trust, is “to keep families together by repairing relationships, improving communication and helping parents to better support their children. In Suffolk, the programme has supported 64 young people aged ten to 17 to live safely at homes with their families; while the Norfolk programme has supported 63 young people aged eight to 15”.

Set for steady growth 

The new trust closes its order book on 16 December, with a listing due on 22 December. It’s available via all the main private stockbroking platforms. There’s no guarantee it will succeed, but it does already have a seed portfolio of £40m in place, along with near-term commitments for another £60m. Big Society Capital is also contributing funds and will end up with 25% of the capital, while clients of Schroders and Cazenove have already said they will acquire £17.5m or 17.5% of shares.  

I think this is an excellent new, innovative vehicle and assuming the flotation is successful, it should grow steadily. There is real demand for these social impact outcomes and Big Society Capital and Schroders are blue-chip names within their respective worlds. More importantly in this volatile world, steady, diversified yearly returns of, say, 4%-5% per annum is exactly what many investors crave.

Recommended

Why investment trusts are the connoisseur’s choice of fund
Investment trusts

Why investment trusts are the connoisseur’s choice of fund

Investment trusts have justified their reputation as the best type of collective investment in 2020, says Jonathan Davis.
7 Dec 2020
Why investors should take investment trusts up on their free lunches
Investment trusts

Why investors should take investment trusts up on their free lunches

Investment trusts are brilliant, says Merryn Somerset Webb. Perhaps the most brilliant thing of all about them is the fact that investors can meet and…
16 Nov 2020
Why an ESG approach is particularly suited to bond investors
Sponsored

Why an ESG approach is particularly suited to bond investors

ESG investing, which focuses on the environmental, social and governance aspects of a business, is all the rage. David C Stevenson explains how bond i…
9 Nov 2020
I wish I knew what ESG investing was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what ESG investing was, but I’m too embarrassed to ask

ESG investing – investing with a focus on environmental, social and governance issues – is the latest incarnation of ethical investing. Here's what it…
23 Sep 2020

Most Popular

Bitcoin: fool’s gold or the new gold?
Bitcoin

Bitcoin: fool’s gold or the new gold?

With bitcoin hitting new highs last week, and close to becoming a mainstream investment, is it really gold for the 21st century?
15 Jan 2021
The MoneyWeek Podcast: bitcoin special
Bitcoin

The MoneyWeek Podcast: bitcoin special

Merryn talks to bitcoin experts Dominic Frisby and Charlie Morris to get the lowdown on the cryptocurrency to find out why it's such a huge global phe…
15 Jan 2021
Leasehold reforms promise the end of a nightmare for many homeowners
Property

Leasehold reforms promise the end of a nightmare for many homeowners

Horror stories about unscrupulous landlords profiting from a legal relic of the feudal era are about to get a happy ending, says Simon Wilson.
16 Jan 2021