What is social investment? About Triodos Bank

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1 What is social investment? About Triodos Bank One of the world s leading ethical banks. We only support or lend to businesses and organisations whose mission is to generate positive social or environmental impact. European bank - 6bn under management UK HQ in Bristol banking and CF advisory Experienced lender and adviser to social and environmental organisations 1

2 What is social investment? Triodos - examples of social investment sector deals Transactions have a range of risk profiles LOW MEDIUM HIGH Charity Bonds Social enterprises Social Impact Bonds (fixed rate 5 year bonds) (development capital) (PbR contracts) 2

3 What is social investment? Financial instruments bonds vs shares Bonds Useful for charities which have no share capital Provide investors with a regular yield and repayment obligation Generally issued unsecured ranking behind bank debt Considerations debt capacity, risk & yield, covenants, ability to repay Shares Can be issued by companies, CICs or Co-ops Method of raising risk capital no repayment obligation but dilution of ownership Investors can utilise tax reliefs especially EIS Considerations risk and return, governance, ability to exit Hybrids Bonds with equity like characteristics fixed yield plus a revenue or profit share 3

4 What is social investment? Features of the social investment market Sources of investment Big Society Capital seeded funds - Bridges, FSE Group, Social & Sustainable Capital, SIS Other institutional investors - social investment funds, charitable foundations Retail investors HNWs and members of the public Intermediaries IFAs, wealth managers New sources Local (city based) Impact Funds, LA pension schemes Regulation New FCA rules around crowdfunding and similar activities Social sector incubators and grant funds Big Potential ( 10m via BLF for earlier stage social enterprises) ICRF ( 10m via Cabinet Office) for developing social enterprises and charities Commissioning Better Outcomes ( 40m via BLF) for SIBs Social Impact Bond Centre of Excellence 4

5 What is social investment? Social Investment Tax Relief Principal features Introduced in April 2014, received Royal Assent in July 2014 offers 30% up front income tax relief against an eligible social investment eligibility unsecured investment (can be in the form of debt (bonds) or equity) eligibility charities, CICs and CBCs (and SIBs) with less than 250 employees Investment needs to be held for minimum of 3 years intended to work in a similar way to existing tax reliefs such as EIS, SEIS and VCTs State Aid rules initial relief limited to around 290,000 per issuer Government is applying to EU for increase in relief (aim 5m by 2016?) Potential effect on social investment market? could generate over 480m in social investment over 5 years Cabinet Office Triodos view significant incentive if relief is increased to 5m 5

6 What is social investment? Contact details Thank you Dan Hird

7 Big Issue Invest The Role of Social Investment Funds Sarah Forster, Deputy CEO and Director of Development 18 th September, 2014 Financing sustainable solutions to social problems.

8 Who we are Specialist social investment organisation Wholly-owned by The Big Issue the UK s best known social business Mission to back social ventures that help tackle poverty and inequality in the UK Provide finance to social enterprises up to 1.5 million, from debt to equity, early stage to growth capital Raised and invested over 25 million in 300 social enterprises throughout the UK Three lines of business: Corporate Social Venture programme Lending Fund Management BII Investments ( ) by social impact area 2

9 Today two funds BII Direct Social Investment BII Public Market Social Investors - corporates, foundations and HNWIs Institutional Investors Public Sector Investors Retail investors via platforms BII Fund Management Threadneedle Asset Management Ltd Fund Manager BII Social Advisor Social Enterprise Investment Fund I Threadneedle UK Social Bond Fund 3

10 Social Enterprise Investment Fund (SEIF) Investors seeking financial and social returns Social enterprises seeking growth capital 10 year, closed ended Limited Partnership 100,000-2 million Creatively structured debt, quasi-equity and/or equity Returns linked to revenue growth/profitability Measurable social impact Panaphur Trust Active involvement postinvestment (Board seat) Henry Tinsley, former Chair of Green and Blacks 4

11 SEIF investment examples Moneyline Provide affordable loans, savings services and financial advice to individuals on low incomes 55,000 loans disbursed totalling 32.5m; 70% to women, many of them single mothers BII has lent 800,000 since 2006 of which 100% on-time in full repayment; 1m investment made in 2013 with financing from Big Society Capital Target return of 10% London Early Years Foundation Making high quality day care available to families that have traditionally been unable to afford it in 24 London communities. Unique social business model that uses sustainable income from nurseries in more affluent areas to actively target the heart of some of the capital s most deprived communities BII investment of 625,000 to support expansion of 10 new nurseries in 2014 Highland Home Carers An employee-owned social enterprise offering high quality home care to the elderly and disabled in the Scottish Highlands Turnover of 4.5m and 246 employees in 2013 and growing fast BII provided 300,000 to refinance business and support winning of new contracts Thames Reach Mission to help homeless and vulnerable people to find decent homes, build supportive relationships and lead fulfilling lives 30 years experience and an excellent track record of working with the most entrenched rough sleepers; 22% of staff were once homeless 250,000 investment in Payment by Results contract ( social impact bond ) with GLA

12 Looking ahead Demand - small, but growing market of viable social enterprises. Often equate social investment with low-cost, high risk finance. Supply - growing interest in social investment but few investment products suitable for mainstream retail and institutional market Role of tax incentives Partnership, shared value approach Goal 1: to change the nature of the social investment market and increase the social responsibility of savings and investment in the UK Goal 2: to grow more socially-driven businesses focused on tackling the UK s most pressing social problems. A hand up not a hand out 6

13 Thank you for listening For more information see Contact: Sarah Forster 7

14 What is Social Investment? Sue Cooper St John s Hospital September 2014

15 St Johns Hospital Leading UK almshouse charity Small grants for individuals Larger grants to charities New social impact investment programme

16 UK Social Investment market St Johns part of a national group trusts and foundations Social investment market increased 202m 2012/13 Supply of money growing Financial landscape changing for organisations

17 Financial landscape Gift Economy Grant funding Structured Market Open Market Donations - unrestricted income Restricted funding for a specific purpose Contracts for goods and services Trading - unrestricted income Asking Earning

18 What type of money? High chance of repayment Secured loan Standby facility Property or asset purchase Overdraft Unsecured loan Low Risk Working capital High risk Patient capital Quasi-equity Equity Growth capital Grant Low chance of repayment

19 St Johns Social Investment Programme Loans for incorporated organisations Working with disadvantaged people and communities 25, , year term Fixed interest rate 3 years No arrangement fees

20 Day to day expenses Nukutukulea Agoa Niue

21 Equipment Loans CBEC trucks and baler

22 Summary Loans or investment not right for every activity Loans must have a source of repayment Capital investment will need a return Use St Johns as a starting point to develop ideas

23 Contact details Sue Cooper Head of Social Investment