Social Finance and the FSE group have this week launched the first social investment product for retail investors.
The product, the Social Impact Venture Capital Trust (VCT) is a listed vehicle which will invest in socially-minded businesses on behalf of shareholders, who attract tax relief as VCT investors.
VCT schemes are designed to encourage individuals to invest indirectly into small higher-risk trading companies who are not listed on a recognised stock exchange. Individuals buy shares in VCTs who invest in companies on their behalf.
The Social Impact VCT follows the same model, but involves investment into socially-minded businesses.
Annika Tverin, a director at Social Finance, told civilsociety.co.uk that the Social Impact VCT will invest in social enterprises across four areas – community cohesion, health and education, training and employment and socially-motivated brands.
It would not invest in start-ups, she said, but support established social businesses which need help with cash-flow or scaling-up. It would require all its investees to measure and report on social impact and deliver a financial return on the investment.
“We are making sure that capital preservation is at the forefront of our minds,” she said. “The investment gives a social return and a financial return which allows investors to use capital for other social good.”
The Social Impact VCT, which is the first of its kind in the UK, is looking to raise £20m from retail investors. The minimum investment is £2,000 and investors can expect to get their capital back after eight years. Returns are expected to be between two and three per cent per year and there is up to 30 per cent income tax relief for UK investors.
Tverin said it was an exciting development for the social investment market: “The Social Impact VCT allows individuals to align their beliefs with how they invest their money.”
The FSE group will act as fund manager for the Social Impact VCT, while Social Finance is investment adviser focusing on social impact monitoring and deal origination.
