Scope has become one of the first charities to enter the social bond market in force with a £20m bond issue which will fund, and be repaid by, fundraising and charity shop expansion.
The bond, which will be listed on Luxembourg’s Euro MTF, operates like any commercial bond but will offer a slightly smaller return, or ‘coupon’. The return on investors’ money is expected to come from two sources of income generation the charity has identified: its retail network and fundraising, both of which will be expanded as a result of the cash injection provided by the social investment.
Because the bond is not regulated by the Financial Services Authority, the charity cannot discuss specifics of each bond with regard to what it will fund within Scope. The charity does however have an “overarching ambition” to increase its current retail network of 250 shops by 100 which, a spokeswoman said, it is confident will result in a “good surplus”. She added that the investment in fundraising and charity shops will leave the charity with bigger, more sophisticated programmes which it expects will deliver long-term income generation.
Scope has partnered with specialist social investment firm Investing for Good and commercial operators including the Bank of New York Mellon, Capita and Linklaters and Weil. Investing for Good is reportedly already in talks with other large charities about launching similar social bond schemes. The spokeswoman for Scope told civilsociety.co.uk that today’s launch could be act as a catalyst to normalising and growing the social investment market.
‘Landmark development’
Scope chief executive Richard Hawkes said the launch could change the way charities raise money. “This is a landmark development for Scope and could revolutionise the way we and other large charities raise finance for our work in the future,” he said.
High net worth individuals as well as trusts, wealth managers and others interested in the emerging social investment market will be the target of the bonds.
Hawkes added the bond programme gives the charity “the opportunity to talk to a new and emerging network of prospective supporters and offer them an additional way of investing in Scope alongside traditional donations and philanthropic loans”.
The bonds will be issued in tranches and the charity will be able to set varying maturation dates and coupon rates on the different tranches. The Scope spokeswoman said that as this is a pilot programme, the charity will be monitor and track the progress of tranches as it goes along and as it progresses Scope may not feel it necessary to issue the whole £20m identified.
“We’ll be taking our time, doing things carefully,” she said.
Scope's announcement comes less than a week after the Charity Commission released its new guidance on social investment, indicating that the mechanism is becoming more mature and is expected to gain momentum.
Scope has been involved in social investment-like schemes in the past in raising funds for its Grangewood project, which saw it solicit zero-interest loans and donations to the value of £1.8m.
