EMBARGOED to 00:01 Hours, Friday 7 th November, 2014 30 million loan fund paves way to attracting game-changing commercial finance for charities and social enterprises Santander makes 13.5 million investment to help social ventures deliver better services, create jobs and growth Charities and social enterprises are set to benefit from an innovative new 30 million fund launched today, which paves the way to attract game-changing levels of commercial finance to grow the sector. The Third Sector Loan Fund is pioneering a model designed to encourage banks and other mainstream institutions to invest in funds which finance charities and social enterprises. Santander has committed 13.5 million, believed to be the biggest single investment by a mainstream UK financial institution into a third party fund lending to social ventures. The fund enables financial institutions to invest on a commercial basis, which in turn makes more money available for charities and social enterprises to borrow, providing finance they need to grow, deliver better services and create jobs. It is the UK s largest fund investing in a wide range of charities and social enterprises across all social sectors, and will make loans of 250,000 to 3 million, both secured and unsecured. It is due to announce its first investments in the next few weeks. Chancellor George Osborne said: "With social investment, we ve got a great idea that uses the power of finance to tackle some of the most difficult social problems. It is one of our priorities as a government, and an area in which Britain leads the world. Investment into social enterprises can play an important role in our long-term economic plan as well as in addressing the toughest social issues. I congratulate Santander, Big Society Capital and the Social Investment Business in developing the Third Sector Loan Fund, managed by Social and Sustainable Capital, and would hope to see other High Street banks following their lead." Fund manager Social and Sustainable Capital (SASC) has developed a model, which recognises that different investors have different priorities regarding social impact, financial
return and risk. The fund has also attracted 15 million from Big Society Capital, its biggest investment to date, and a 1.5 million repayable grant from the Social Investment Business alongside Santander s commercial investment. Nathan Bostock, CEO Santander UK, said: Santander s investment will help social ventures grow, provide services to more people and boost their local economies. We believe that supporting positive social change can be a commercial endeavour. Banks need to look at alternative ways to support all sectors of the UK economy. The Third Sector Loan Fund follows other innovations in financing smaller enterprise, which Santander has made, such as our Breakthrough programme to support high growth enterprises and the launch of the Santander $100 million Venture Capital fund to develop the Fin-Tech sector. Investment is needed to maximise the potential of the social economy The Third Sector Loan Fund s emphasis on risk, return and impact responds to a key recommendation in the report by the Taskforce on Social Investment 1, set up by Prime Minister David Cameron under the UK s presidency of the G8, which set out actions with the potential to unleash up to $1 trillion of new private investment to tackle social problems. UK charities and social enterprises employ nearly 3 million people and contribute more than 55 billion to the economy. 2. Access to finance is the single largest barrier to their growth and sustainability, according to a recent survey, 3 preventing them from realising their full potential to improve the services they offer and create new jobs. The shortfall in finance is put at between 300 million and 1 billion a year. 4 Nick O Donohoe, CEO of Big Society Capital, said: This fund is ground-breaking for social investment. It shows that, with creativity and commitment, banks such as Santander can find a way to meet both their commercial requirements and do more to support charities and social enterprises. This is an important milestone in unlocking finance from mainstream financial institutions and exactly the sort of thing we want to use our investments to enable. Rob Wilson, Minister for Civil Society, said: We know that access to finance is one of the biggest barriers for growth for charities and social enterprises and this innovative fund will help to tackle that. This Government has championed the social investment sector, recognising the impact it has in resolving some of most complex societal problems, and the 1 Impact Investment: The Invisible Heart of Markets, Social Impact Investment Taskforce, Sept 2014 2 Social Enterprise: Market Trends (based upon 2012 Small Business Survey), Cabinet Office (May 2013) and NCVO Civil Society Almanac 3 The People s Business, Social Enterprise UK, July 2013 4 Building a social impact investment market: the UK experience, UK National Advisory Board to the Social Investment Taskforce, (Sept 2014) 2
involvement of a major UK financial institution highlights that the market is beginning to move into the mainstream. The Third Sector Loan Fund recognises that different types of investors have different priorities: philanthropists, who want their money to have maximum impact on the causes they care about, may expect little or no financial return; socially motivated investors seek both a social and financial return; and mainstream financial institutions want to support positive social change while achieving security of investment and an appropriate riskadjusted rate of return. Jonathan Jenkins, CEO of the Social Investment Business, said: Our 1.5 million investment has catalysed a fund 20 times that size, creating the UK s biggest fund offering straightforward loans to help charities and social enterprises make even more impact. This is a radical way for philanthropists to make their money work much harder to create change. Ben Rick, Managing Director of SASC, said: Charities and social enterprises providing solutions to our social challenges need access to finance to enable them to do their work. We have raised 30 million in this fund by catering for investors with different priorities on risk, financial return and social impact. The fund absorbs this complexity so that frontline organisations get what they need simple, straightforward loans. The Third Sector Loan Fund will run for 10 years and finance activities which allow social ventures to scale up, increase the impact they make, and generate income to repay their loan with interest, for example by providing the investment they need to expand and compete with commercial organisations to take on new contracts to deliver public services. SASC, which is authorised and regulated by the Financial Conduct Authority and is itself a social enterprise, will identify suitable organisations for the Third Sector Loan Fund to invest in, and make secured and unsecured loans, charging interest of 6%-12%. It will monitor the financial performance of the investment and the impact it makes. It is already open for business and considering its first investments. SASC and the Social Investment Business now plan to develop similar funds, working with philanthropic funders such as trusts and foundations, corporate CSR programmes, and wealthy individuals, who are interested in using their money as catalytic capital to stimulate multiples of investment for the causes they care about. ENDS 3
For further information or interviews, please contact: Social Investment Business and Social and Sustainable Capital David Mason, Greenhouse PR 07799 072320 david@greenhousepr.co.uk Sean Buchan, Greenhouse PR 07842 626873 sean@greenhousepr.co.uk Santander Andy Smith 020 7756 4212 / 07824 473338 andy.g.smith@santander.co.uk Notes to Editors Santander s investment Santander s 13.5 million is believed to be the biggest single commercial investment by a mainstream UK financial institution into a third party fund lending to social ventures. The fund structure The fund is built on a catalytic 1.5 million repayable grant from the Social Investment Business, which has agreed to bear losses before other investors and forego any profits. Big Society Capital has committed 15 million of risk capital and will be next to bear any losses, but will receive all excess returns from the fund. Santander will provide 13.5 million of senior debt, receive a fixed-income return and only faces losses if the other investors lose all their capital. Its investment on commercial terms differentiates it from a number of funds run by banks as part of their corporate responsibility programme. Banks and social investment Barclays, HSBC, Lloyds Banking Group and RBS each made a 50 million equity investment in Big Society Capital, which is a wholesale social investor, and does not directly invest in charities and social enterprises. Social and Sustainable Capital (SASC) is an FCA authorised and regulated fund manager and social enterprise providing finance to charities and social enterprises in the UK. Our mission is simple: to help social sector organisations deliver scalable and sustainable solutions to social issues, reducing poverty, increasing social mobility and bringing about a fairer, happier society. We do this by providing simple financing for viable organisations so that they can continue to grow and achieve greater impact. www.socialandsustainable.com Santander UK is a leading financial services provider in the UK and offers a wide range of personal and commercial financial products and services. At 30 June 2014, Santander UK serves more than 14 million active customers with c. 20,000 employees, c. 1,000 branches and 50 regional Corporate Business Centres. Santander UK is subject to the full supervision of the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) in the 4
UK. Santander UK plc customers are protected by the Financial Services Compensation Scheme (FSCS) in the UK. Banco Santander (SAN.MC, STD.N, BNC.LN) is a retail and commercial bank, based in Spain, with a presence in 10 main markets. Santander is the largest bank in the euro zone by market capitalization. Founded in 1857, Santander had EUR 1.34 trillion in managed funds, 107 million customers, 13,225 branches more than any other international bank and 183,648 employees at the close of June 2014. It is the largest financial group in Spain and Latin America. It also has significant positions in the United Kingdom, Portugal, Germany, Poland and the northeast United States. In the first half of 2014, Santander registered EUR 2.756 billion in attributable profit, an increase of 22% from the same period of the previous year. The Social Investment Business is one of the UK s leading social investors and has invested more than 340 million in 1300 charities and social enterprises since 2002. We provide simple finance to help them grow and transform the communities in which they work. We pioneer new finance solutions to increase the funds available for social investment. The Social Investment Business has invested 500,000 in Social and Sustainable Capital to enable it to scale up its activities and will receive 51% of all future profits. This investment won it Social Investment Initiative of the year at the 2014 Charity Times Awards. www.sibgroup.org.uk @TheSocialInvest. Big Society Capital (www.bigsocietycapital.com) is a financial institution with a social mission, set up to build the social investment market in the UK, so that charities and social enterprises can access appropriate repayable finance to enable them to grow, become more sustainable and increase their impact on society. It is doing this by building a diverse social investment market: encouraging investors to lend or invest money to achieve a social as well as a financial return. Since it was set up as an independent organisation in 2012, Big Society Capital has committed over 165 million in investments to specialist organisations who lend to charities and social enterprises. Over five years Big Society Capital will be capitalised with approximately 600 million, from a combination of English dormant bank accounts and the four main UK high street banks. 5