Fund giant Schroders and social investment specialists Big Society Capital (BSC) have teamed up to launch a ‘first of its kind’ social impact trust.
The Schroder BSC Social Impact Trust will aim to deliver a positive measurable impact on people’s lives across the UK as well as sustainable returns for investors.
The trust is seeking to raise £100 million at an Initial Public Offering on the London Stock Exchange by offering 100 million ordinary shares at £1 each.
BSC Chief Investment Officer Jeremy Rogers said the new product was created in response to rising demand for high impact social investments in the UK.
He told Good With Money: “The Covid-19 pandemic has exacerbated many social challenges from homelessness to domestic abuse. Social impact investing can directly help the charities and social enterprises working to tackle these problems, for example, by enabling them to provide accommodation and support for those experiencing homelessness and survivors of domestic abuse.
“Now more than ever, people want their investments to stop being part of the problem and become part of the solution. Social impact investing provides a tangible way to do this. It is an important part of what people can do to create the world they want to live in.”
Low correlation to stock markets
With a minimum investment of £1,000, Schroders and BSC are aiming to bring private social impact investments to a wider market. Investors’ money will be put into three main ‘buckets:’
- High impact property, including tackling homelessness and the housing needs of survivors of domestic abuse.
- Direct lending to charities and social enterprises, mostly helping to deliver government contracts in areas such as health and social care.
- Social outcome contracts, which help the Government to achieve better life outcomes for vulnerable people. Investors are paid a portion of the savings that are made to the public purse.
Returns are expected to be the rate of inflation plus two per cent, including fees, per year.
The trust is expected to be particularly attractive to investors looking for funds with a low correlation to the mainstream financial markets. This means they aren’t so vulnerable to stock market volatility caused by events such as the coronavirus outbreak.
A recent study by Schroders found that a massive 78 per cent of people made changes to their portfolio when stock markets experienced periods of volatility in February and March 2020.
Investors will be able to use an interactive online map to track the social impact of their money on a local level. Jeremy said: “When you ask people what kind of social impact they’re interested in, they almost always choose local. Through an online map, people will be able to zoom in and see the 5-10 organisations in their local area that their money is directly benefiting.
“While diversification is a good thing for investors, having a portion of their portfolio that is tangible and local I think will become increasingly important. People will be able to ask ‘where is the affordable housing and local social infrastructure that my money is investing in?'”
‘Clear and measurable impact’
An annual ‘impact report’ will provide detailed evidence of the difference that investments made through the trust are making to people’s lives.
Jeremy said: “We’re looking at ‘how do you get someone engrained in rough sleeping into full time accommodation?’ and ‘how do you help people going through domestic abuse?’ These investments can make life-changing impact to the individuals involved.
“We are going to have very clear and measurable evidence of what we’re achieving so people can see that. It creates a connection between people and their money, where they can ask ‘what is my money being used for?’ Too often it’s all a mystery.”
There will also be case studies for individual projects so investors can see the difference their money is making in their own communities.
Jeremy said: “Investors will be able to look at projects happening in a 20 mile radius of where they live to see the impact their money is making on a human level. With the initial £100 million there will be 75 to 150 underlying investments across the country. As the trust builds there will be many more, so we’ll be able to get that local richness over time.”
BSC has seen an increasing realisation among big financial institutions that far from coming with a financial premium, impact investing can generate good returns.
“Just a few years ago we were hearing from big pension fund trustees things like ‘we aren’t sure we can invest in this way because our sole goal is the financial outcome for our pension fund holders,'” said Jeremy. “Now there is a big change in mindset happening where they are seeing that far from being a detriment to returns, investing for impact can potentially enhance them.”
Risk warning: When you invest, your capital is at risk and you could lose all of your investment. The value of investments and any income from them can go down as well as up, and past performance is not necessarily an indicator of future performance. Before you invest, make sure you are comfortable with the level of risk you are taking on.