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First SITR qualifying social impact bonds issued

The bonds will provide £910,000 to enable four charities to help young people who are homeless or at risk of homelessness

05-02-2015 |

  • Four charities to support around 500 young homeless people to find accommodation, education and employment
  • Over 15% of the capital raised provided by individual investors benefitting from the newly introduced SITR  
  • Potential interest of 7% p.a., equivalent to 19.3% p.a. investment return for the three year term with the benefit of SITR
  • Already fully subscribed
 

The Corporate Finance team at Triodos Bank N.V. is pleased to announce that the first ever social impact bonds (SIB) to benefit from SITR are now fully subscribed.   

Giving everyone a fair chance

The Ambition East Midlands and Aspire Gloucestershire social impact bonds will provide £910,000 of working capital to enable four charities to help around 500 young people who are homeless or at risk of homelessness.

ambitionreading

The bonds will provide £910,000 to enable four charities to help young people who are homeless or at risk of homelessness

Ambition East Midlands covers Derbyshire and Leicestershire is a newly formed partnership of three local charities P3, YMCA Derbyshire and The Y aiming to support 340 young people. Aspire Gloucestershire is a partnership between CCP and P3 and will work with 150 young people.

Mark Simms, CEO at P3 said: "In the current economic climate charities are having to look for alternative and more innovative ways of sourcing funding. We passionately believe that these new services will fundamentally change the lives of young people around the country."

"However, with traditional methods of funding disappearing we had to look at new ways to find the finance that we needed to bring the project to life. We’re delighted that we can be one of the first and pioneering charities to be issued with social finance, we’re an innovative organisation by nature and social impact bonds suit our unique way of working."

We will now be able to give nearly 500 young people, who previously would have gone unsupported the chance to play a positive part in their communities and live fulfilling lives."

Government paying for results

Ambition East Midlands and Aspire Gloucestershire were awarded payment by results agreements with the Department for Communities and Local Government and supported by Cabinet Office as two of the seven SIBs created by the Fair Chance Fund. The investors in each partnership will only receive their interest and capital payment if Ambition East Midlands and Aspire Gloucestershire are successful in meeting their targets for housing and supporting vulnerable young people into education, employment and training. The capital raised enables the charities to deliver the programmes ahead of being able to claim for outcome payments.    

"Rob Wilson, Minister for Civil Society said: "Social impact bonds provide a relatively new and vital source of finance for charities and social enterprises and have the potential to transform the lives of disadvantaged people. By reducing some of the risk, SITR enables individuals to invest in the transformation of their communities and creates opportunities for individuals to use their money to change lives as well as generate a return."

"I’m delighted that Triodos has led the way with these first two Social Impact Bonds and look forward to seeing SITR unlocking more opportunities for individuals to invest for good."

First SITR qualifying social impact bonds

Triodos Bank Corporate Finance structured the transaction such that individual investors are able to benefit from the newly introduced SITR and offset 30% of their upfront investment against their income tax liability.

Ambition ella

"This project will give 150 young people, who previously would have gone on unsupported, that very chance and would not be possible without the many local organisations who will be playing a role in the delivery of the project."

Ella Hawkins, Service Manager of Aspire

This effectively boosts investors’ returns from 7% p.a. interest to 19.3% p.a. investment return for the three year term. The returns are dependent on the success of the business model and the ability to repay the loan notes. The bonds are now fully subscribed and closed to new investors.

Dan Hird, head of Triodos Bank Corporate Finance, comments: "It is the first time that this advantageous tax relief is being used to get individual investors backing social impact bonds that can turn young people’s lives around."

Investors doing well while doing good

Each of the charities has provided some of the needed working capital with the majority being invested by specialist social investors Big Issue Invest, CAF Venturesome and the Key Fund. The individual investors are either Triodos Bank investors, supporters of the charities or – in the case of Aspire – clients of the financial planning firm Paradigm Norton.

Richard Child, Director of Paradigm Norton Financial Planning said: "We are delighted to be playing this pioneering role on behalf of the wealth advisory community by introducing our clients to the Aspire bond in our capacity as their advisers. The Aspire bond is an excellent beginning to what we hope will become a flow of further investment opportunities to meet what we are sure will become a growing demand amongst our clients."

dan hird

"It is the first time that this advantageous tax relief is being used to get individual investors backing social impact bonds that can turn young people’s lives around."

Dan Hird, Head of Corporate Finance at Triodos Bank

Roger Ross, a Triodos Bank investor and committed social investor said "I have been making social investments for 20 years and I am delighted with the returns. Also it's fantastic the way the market has grown, I love the tax breaks so now I'm switching all my remaining old style investments into social investments in order to make my funds benefit the whole community."

An investment in the SITR Loan Notes is speculative and involves a degree of risk. The ability to repay the SITR Loan Notes after three years is dependent on the success of the business model and in the event of underperformance; there is a risk that investors could lose a part or all of their capital. 

Advisers and support

Triodos Bank Corporate Finance were lead advisers to Ambition East Midlands and Aspire Gloucestershire structuring the transaction and sourcing investment. Bates Wells Braithwaite provided legal advice and drafted the main legal documentation, while Neil Pearson advised on the SITR aspect of the transactions. Neil Pearson has been engaged by Big Society Capital to support the use of the social investment tax relief in its early stages, including through working with advisers on the first SITR deals.

Nick O’Donohoe, CEO of Big Society Capital, commented: "The social investment tax relief is now really beginning to make a difference. Today’s announcement shows that it can enable individuals to finance  real innovation in our essential public services, while providing the simple loans that charities and social enterprises need. We are very encouraged by the interest shown by a range of individual investors to pioneer with the first deals. Congratulations to Triodos Bank, P3, CCP, YMCA Derbyshire and The Y for their hard work in getting these deals up and running."

Aspire Gloucestershire benefitted from a grant from the Investment and Contract Readiness Fund (ICRF) that offers grants to social enterprises like Aspire Gloucestershire to bring in corporate finance expertise.

-ENDS-

Notes to editors:

For more information, arranging interviews, available case studies and or additional pictures, please contact the Triodos Bank Communications team:


Faye Holst, T 0117 9809 584 or M 0755 778 5167

faye.holst@triodos.co.uk
Lisa Stanley, T 0117980 9721 or M 07983 002013lisa.stanley@triodos.co.uk
William Ferguson, T 0117 980 9770 or M 07899 965 640 william.ferguson@triodos.co.uk
Rachel Mason, T 0117 9809721 or M 0750 078 8258 rachel.mason@triodos.co.uk

About SITR

To be eligible for SITR investments, social impact bond contractors must be accredited under a new scheme run by the Cabinet Office. Eligibility criteria include: the social impact bond contractor must be a special purpose vehicle company limited by shares; it must intend to fulfil an outcomes based contract, where the commissioner is a public body; it must be paid based on the achievement of social outcomes; and no more than 40% of payments due under the contract can be on a fee for service basis.

About Triodos Corporate Finance

Triodos is one of the world's leading sustainable banks. Its advisory arm, Triodos Corporate Finance, works exclusively with sustainable businesses and has a long track record of advising businesses on raising capital through private placements and retail offers. Over the past three years, Triodos Corporate Finance has raised over £55 million for businesses within the sustainability sector with investments from institutions, charitable foundations, high net worth individuals and retail investors. www.triodos.co.uk

About Triodos Bank NV

Triodos Bank only finances enterprises which create social, environmental or cultural added value. Key sectors include organic food and farming, renewable energy, social housing, and fair trade. Transparency is a core value: customers are informed about the bank's lending and can target their savings to particular areas of investment. A range of personal savings accounts is offered, and full banking services are available for businesses and charities. Triodos Bank is an independent bank founded in the Netherlands in 1980. Its principles and independence are protected through a special shareholding trust. The UK office opened in 1995 and is based in Bristol.

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