Schroder BSC Social Impact Trust (SBSI) has released its results for the period ending 30 June 2023.
- Over this 12 month period SBSI reported a NAV total return of 0.8%. Since its inception on 22 December 2020 SBSI has returned a NAV total return of 8.6%. Key drivers of performance were an increase in returns from its High Impact Housing portfolio and a mix of income and capital gains in the Social Outcomes Contracts portfolio thanks to strong performance in the underlying assets.
- SBSI declared a dividend of 2.3p for the year, a 77% increase on its 1.3p per share for the prior year. The board has increased its yield guidance from 1-2% to 2-3% as a result.
- SBSI continues to make good progress in achieving its social outcomes. 100% of its investments align with the UN Sustainable Development Goals, across four key impact themes, with the majority of the portfolio aimed at reducing poverty and inequality.
- SBSI has financed 168 organisations and reached 276,000 people, of whom at least 94% were from disadvantaged and vulnerable backgrounds. SBSI’s investments helped fund over 27,000 affordable homes through the High Impact Housing asset class and generated over £98m of near-term value as savings for government and households, relative to the £87m it had committed (as at the date of its impact report).
- SBSI’s rating varied widely over the period, moving from a (15.3%) discount to a 1.5% premium, with an average 12 month discount of (7.3%). The board repurchased 711,720 shares over the year, for a total consideration of £674,000.
Investment managers Hermina Popa and Jeremy Rogers commented:
“While the solutions provided by the organisations that the Company supports are needed more than ever, these organisations need to manage higher cost bases themselves in order to remain viable. We work with organisations with long track records (30 years on average), who have demonstrated their resilience over multiple economic cycles. Two thirds of our capital is invested in models with revenues rising with inflation; while our historical returns to date are lagging the CPI+2% target, as explained in the Performance Update section, we are maintaining our target for the medium-to-long term, as we expect some of the benefits to flow through with a lagged effect, and the inflation and interest rate environment to stabilise. What we have seen in the last year was an increase in the income generated by the portfolio, as a result of increases in the interest rate on floating-rate loans, and higher income generated by maturing investments. This increased income is being passed on to our investors as a dividend exceeding our previous guidance of 1-2% yield on net asset value. We expect the income generated by our investments to continue to improve in the future and have increased our future guidance on dividend yield to 2-3%.
“With a general election expected in the next 12 months, we acknowledge our portfolio is subject to policy risk. At the time of writing, 70% of our committed capital is underpinned by government-backed revenues. During the year, we have seen a negative impact from policy risk in our portfolio, following a change in government policy regarding traineeships, leading to a write-down in the Bridges Evergreen portfolio. While this development was disappointing, we believe this to be an isolated case in our portfolio, which is diversified across multiple policy areas, mostly targeting the most vulnerable and disadvantaged groups. Successful interventions in these areas typically generate savings for the government that are multiples of the cost, and therefore these areas benefit from cross-party support. We further mitigate policy risk by working with organisations that have been successfully operating for several decades, navigating different policy environments, and making investments that benefit from some element of asset backing.
“We are encouraged to see growing appetite for sustainable investment products, and an increased focus both from regulators and investors on ensuring quality and clear standards.
“In this uncertain environment the goals of the Company remain the same: to deliver for shareholders high quality returns with a low correlation to traditional quoted markets alongside significant social impact for more disadvantaged groups across the UK.”