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UK charity launches £20m bond as regulator clarifies ethical investment guidance

Innovative bond programme developed with Investing for Good

Cerebral palsy charity Scope is to become one of the first charities in the UK to tap the capital markets with the launch of a £20m (€23.3m) bond programme.
The innovative move comes as the Charity Commission, the independent charity regulator, has issued new guidance on ethical investment for the £81bn sector.
Scope says it is piloting the “landmark” programme to complement its existing funding from donations and philanthropic loans.
The bond will be listed on the Euro MTF market in Luxembourg and will be “subject to the same regulation and protection” as corporate bond investors. The bonds will be issued in tranches and the charity will vary their duration and coupon, although Scope warns investors that they can expect lower returns than from commercial investments.
“If you’re the kind of investor who just wants to make a quick buck this isn’t the vehicle for you,” Scope Chief Executive Richard Hawkes told BBC radio. “We’re guaranteeing a financial return and we’re also guaranteeing a social return.”

Scope has partnered with Investing for Good, the specialist social finance intermediary that is part of The Social Investment Market CIC Ltd., on the project.US banking giant BNY Mellon will act as registrar for the bond and Capita will be nominee holder. Law firms Linklaters and Weil, Gotshal & Manges have offered legal support.
Scope hopes the innovative approach could pave the way for greater participation in the capital markets for charities.

“If you just want to make a quick buck this isn’t the vehicle for you”

Meanwhile, the Charities Commission’s new Charities and Investment Matters guidance confirms that charity trustees “can invest ethically, sustainably, for a financial return or to achieve charitable aims or for a mix of all or any of these”.
The watchdog emphasises that trustees must be clear about their motive in making an investment and must be able to justify that they are using their charity’s resources in its best interests.
Elsewhere, ethical bank Triodos has said a £1m tax-efficient social impact bond will be offered to high net-worth investors early next year to support the Bristol Together social enterprise.