The Schroders BSC Social Impact Trust can be described as unique in that it is an attractive investment opportunity that helps support some of the most vulnerable communities in the UK.
Big Society Capital was established by the government of the day 10 years ago. It invests in a range of specialist funds, normally only open to institutions and charities, which aim to achieve genuine social impact while paying a realistic investment return.
The trust’s portfolio is largely uncorrelated to the wider markets because its underlying investments are all linked to social strategies in the UK, and for any investor who thinks you have to give up a return to make a real impact then think again – with this trust you can do both.
While the performance of broader environmental, social and governance (ESG) funds suffered at the start of 2022 this trust held up well. As a result, shareholders are unlikely to see the value of their shares diverge from that of the underlying investments.
BSC’s financial results for the second half of last year were published at the end of March and should be viewed on two levels – financial and social impact.
From a financial perspective the net asset value (NAV) total return was 0.9% from July to December 2021, and 7% in just over 12 months since the trust’s launch. All the money raised at launch and in new share issues in November has either been invested or allocated to impact investments amounting to nearly £73m. The trust also paid a dividend of 0.57p per share in the first half of 2021 as it indicated it would. The current aim is to pay just one dividend a year. The financial performance is solid to say the least, and if it achieves a 7% per annum NAV return going forward then it will be a very good prospect indeed.
Where the trust has really excelled in a short space of time is how the monies raised have been invested and the impact that has had for vulnerable parts of UK society. Trust chair Susannah Nicklin says the investments are already providing significant social impact through 100 organisations, reaching more than 157,000 people. At least 90% of these are from disadvantaged or vulnerable backgrounds.
The portfolio companies are also delivering over 10,000 affordable homes, resulting in £36m in near-term value as savings for government and households. Here is one of the most attractive elements of the trust. Its investments can help reduce government spending in certain areas, such as social housing, which means money can be allocated to other areas that are also in need of support.
Jeremy Rogers, the Schroders fund manager leading the portfolio, says the trust is also beginning to look at the rising cost of living and fuel poverty, issues that are disproportionately affecting lower-income groups. He points to investments in companies such as AgilityEco, which helps lift people out of fuel poverty, or the new Refugee Transitions Outcomes Fund, which aims to help refugees already in the UK, irrespective of nationality.
Such initiatives are of critical importance at this time. Any money in the trust that is not allocated to social impact funds is put into listed UK equities in a variety of sustainable investment trusts, meaning it can move this money into new investments when required. Schroders refers to this as the ‘liquid ESG portion’. Management fees are not charged on this element to maximise the sums that can go to social impact.
This trust is extremely interesting. It has an impressive portfolio and in many ways buying its shares could be seen as an alternative or complement to a charity donation, where often it is unclear how much of your donation feeds through to the underlying social need.