About a year ago, ahead of last year’s ESG conference, I wrote an article about a fund that was looking to launch – Schroder BSC Social Impact (SBSI). In the event, it made it across the finishing line and IPO’d with assets of £75m, short of its £100m target but a reasonable size, nonetheless. I thought it might be worth having a look at how it is getting on.
The NAV is doing OK – it was 104.3p at the end of June 2021, up from the 100p per share launch price and an opening NAV of 98.32p – reflecting the costs of the initial launch. The target is to generate annual returns of 2% above the rate of inflation (as measured by CPI). Even with inflation at elevated levels, the trust seems to be meeting its objective.
IPO proceeds invested
The portfolio is spread across three areas – high impact housing, debt for social enterprises and social outcomes contracts. At 30 June, 97% of the net IPO proceeds had been committed to investments, but because some of the investees draw down finance as and when they need it, just 64% had been invested in the three core areas. A further 14% was invested in liquid ESG (environmental, social and governance) bonds. The balance of 22% was in cash.
Debt for social enterprises
Debt for social enterprises was the largest exposure within the fund at the end of June, accounting for 46% of committed money. This was split between a Charity bond portfolio (which is managed by Rathbones), Bridges Evergreen Holdings, Charity Bank co-investments and a UK bond issue from Triodos Bank.
High impact housing
The high impact housing division accounted for 42% of committed money. Schroder BSC Social Impact is providing funds to the Resonance Real Lettings Fund (which has homes for people trying to make the transition from temporary or emergency accommodation); the UK Affordable Housing Fund (homes for people who can’t afford to buy homes on the open market); Social and Sustainable Housing (which provides finance to charities looking to buy homes for vulnerable people such as those fleeing domestic abuse, children leaving care or ex-offenders); and the Man GPM RI Community Housing Fund (which seeks to increase the stock of affordable, sustainable and multi-tenure homes in the UK).
Social outcomes contracts
Exposure to social outcomes contracts comes through the Bridges Social Outcomes Fund II Limited Partnership.
Game-changing investments
The more that you dig down within the portfolio, the more fragmented and interesting it becomes. Basically, the fund is providing potentially game-changing amounts of money to a wide range of charities and socially useful projects. At the start of November, the trust said it was supporting over 100 frontline organisations.
Investment opportunity
With 97% committed at the end of June and money being drawn down all the time, it is not surprising that Schroder BSC Social Impact is coming back to investors now seeking more cash. It is looking to issue 25m shares at 105p to help fund a £35m pipeline of investments that could scale to £70m. The manager thinks it can get the net proceeds of this issue committed to investments within six months.
We’ll find out next week how much the fund has raised. It ought to do well we think. The trust has traded close to asset value since launch and has declared its first dividend. It appears to be fulfilling its objectives. Interest in issues of ESG and sustainability continues to build and this is one of only a handful of funds that is delivering a clear positive social impact. The investment returns may be modest but the social outcomes are much greater.
While we await the results of the fundraise, there’s still time to register for our ESG conference, which takes place on 16th (environmental day), 17th (social day) and 18th (governance day). For those particularly interested in social impact investing, the 17th has talks from Paul Bridge (CEO within the Social Housing team at Civitas Investment Management – the manager of Civitas Social Housing) and Ben Richie (the manager of Dunedin Income and Growth), with more names to be added shortly.