Schroder BSC Social Impact Trust announces float – Schroder BSC Social Impact Trust intends to launch an initial public offering (IPO) and to admit its shares on the premium segment of the Official List of the Financial Conduct Authority and to trading on the main market of the London Stock Exchange.
The company is targeting an issue of up to 100m ordinary shares at 100p by means of a placing, offer for subscription, intermediaries offer and issue of consideration shares. In addition, a placing programme will allow the company to issue a further 100m shares (ordinary shares and/or C shares), in the 12 months from the date of publication of the prospectus and following initial admission.
The investment objective is to be the first London listed investment company to deliver measurable positive social impact as well as long term capital growth and income, through investing in a diversified portfolio of private market impact funds, co-investments alongside impact investors and direct investments in order to gain exposure to private market social impact investments.
Schroder Unit Trusts Limited (Schroders) is the AIFM. Big Society Capital Limited will be the delegated portfolio manager with responsibility for the investment of the assets. Big Society Capital is one of the UK’s leading social impact investors, with a track-record in delivering sustainable financial returns and positive impact on people’s lives in the UK.
Social Impact Investment
“Social impact” is the improvement of the life outcomes of beneficiaries in a specific target group or groups. After years of investing in social impact, early pioneers such as Big Society Capital have identified models which are at a point where they require significant capital to scale. Big Society Capital is one of the UK’s leading social impact investors, with a track-record in delivering sustainable financial returns and positive impact on people’s lives in the UK.
Big Society Capital adopts the Impact Management Project1 framework as the emerging global standard for managing and articulating social impact. The investments are expected to be “high impact” within the meaning of that framework, on the basis that they are expected to sit within “Category C” of “Contribute to Solutions”. Such investments are generally seen as higher impact than investments in “Category A” that “Avoid Harm” or “Category B” that “Benefit Stakeholders”.
Since 2012, Big Society Capital has sought to improve the lives of people in the UK by connecting social impact investment to social enterprises and charities. The UK social impact investment market has grown significantly since 2011, the year before Big Society Capital was established, with a compound annual growth rate of 25 per cent. Based on underlying market demand and current growth rates, Big Society Capital estimates that the investable high impact segment of the UK market will be approximately £10 to £15 billion by 2025.
The company will invest in:
- private market impact funds and separate accounts managed by third party asset managers (“Impact Funds”);
- co-investments made alongside Impact Funds or other impact investors (“Co-Investments”); and
- direct investments in Social Impact Investments (“Direct Investments”).
The Company intends to demonstrate measurable positive outcomes through transparent reporting, aligned with the United Nations’ action plan, adopted in 2015, comprising 17 goals aimed to eradicate poverty and hunger, fight inequality, tackle climate change and achieve sustainable development globally by 2030 (the “UN Sustainable Development Goals”).
The company will invest across a range of asset classes with a focus on the three primary areas identified in the investment policy:
- High impact housing – including property funds that either acquire or develop high quality affordable housing, from more specialist housing for vulnerable groups (for example, transition accommodation for people who have experienced homelessness or survivors of domestic violence) to housing for low income renters currently living in poor quality or insecure accommodation.
- Debt for social enterprises – including charity bonds, co-investments in portfolios of secured loans and mezzanine debt funds with some equity that invest in established social enterprises.
- Social outcomes contracts – contracts between a public sector or government body and a delivery organisation whereby an external investor provides upfront capital to the delivery organisation and is repaid by the income stream from the public sector body based upon social outcomes delivered rather than on a fee for service basis.
Seed Portfolio
The company plans to buy seven assets from Big Society Capital, comprising five impact funds and two co-investment debt portfolios. These are valued at about £40m and come with outstanding commitments of about £20m. Big Society Capital will take shares and cash for these stakes, becoming a significant shareholder at launch (about 25%). In addition, Schroder will invest £17.5m for a 17.5% stake at launch. Big Society Capital will retain an interest in most of the social impact investments in this initial portfolio. It is anticipated that the net proceeds of the initial issue will be substantially committed within 12 months of initial admission and substantially invested within 18 months of initial admission. The board, the AIFM and the portfolio manager hope to grow the company and its portfolio to about £300-500m within five years.
Target returns and distribution policy
The company aims to provide an NAV total return of inflation (as measured by CPI) plus 2% a year (once the portfolio is fully invested and averaged over a rolling three- to five-year period, net of fees). The company will pay out its income as required by applicable law but does not have any distribution targets. Distributions would be paid annually and are anticipated to represent in the region of a 1-2 per cent. yield on net asset value, once the portfolio is fully invested.
NB: the investments themselves aren’t necessarily inflation-linked.
Here is a link to the prospectus – remember the issue is not available to investors in all countries.