New charity bond platform to boost social investment options

A platform enabling charities to raise medium term debt through bonds listed on the London Stock Exchange will provide social investors more opportunities to have a positive impact with their money, whilst making a financial return.

Retail Charity Bonds, which launched this week, is designed to enable established UK charities, with strong credit worth, to raise capital market debt funding from retail and wholesale investors. Charities will be able to raise funds through five to ten year loans as an alternative to bank debt.

Allia, a charitable community benefit society, has established the initiative in association with Cannacord. It is also supported by a range of organisations, including Big Society Capital, Ecclesiastical Investment Management, Rathbones and Threadneedle Investments.

Tim Jones, chief executive of Allia, described the move as a “major step forward” in offering investors opportunities that provide a financial return whilst creating “tangible social benefit”.

The initiative allows private investors to take a direct approach to their ethical investment and support charities that are delivering social benefits in line with their personal values. This transparent way of operating gives investors the benefit of seeing the impact of their investment.

The bonds will provide investors with a fixed income, as bonds pay out over a defined period of time with interest payments. The bonds can also be held in an individual savings accounts (ISA) or self-invested personal pensions (SIPPS).

Investors should note that the Financial Services Compensation Scheme does not cover bonds issued by Retail Charity Bonds.

Nick Hurd, minister for civil society, commented, “The launch of Retail Charity Bonds is an important step for the sector, creating even more social investment opportunities while giving charities an additional source of funding to help them plan for the future. I hope investors and organisations take advantage of this opportunity to help strengthen the sector as a whole and support even more people in our society.”

The first bond to be listed on the London Stock Exchange is currently in development and is expected to be announced shortly.

Investing in charities is an area that has been growing among ethical and social investors and gradually more options are entering the marketplace. A fund launched by Social and Sustainable Capital in February is one of the new alternatives that aim to address this growing demand.

Photo: Eastop via Freeimages  

Further reading:

There are two sets of eyes on charities’ investments

Charity Bank eyes growth after £14.5m social investment from Big Society Capital

New fund allows social investors to support charities and social enterprises

Government announces £30m social impact bond for vulnerable young people

Threadneedle and Big Issue Invest join forces for UK Social Bond fund