UBS Sponsors UK's First Social Investment Tax Relief Fund

Wealth Manager UBS has announced that it is sponsoring social impact investment specialist, Resonance, to develop the first in a series of Social Investment Tax Relief (SITR) funds in cities across the UK.

The first SITR fund aims to launch in Bristol In the first quarter of 2015, and the vision is for six to eight more funds in cities with a likely next one focused on Manchester.

UBS says each SITR fund will launch with around £5m to invest in local Social Enterprises, and if Brussels sanctions the UK Government’s Autumn Statement proposals to extend the scheme then each fund could be considerably larger.

The SITR funds will harness a new Government initiative to empower social enterprises to tackle inner city poverty while still providing a risk-adjusted return to investors.

Some of the social issues that investees will tackle include: job creation, skills development, debt reduction & support, improved standards of living, health & well being, addressing the needs of addicts and ex-offenders, improving access to affordable accommodation, alleviating long-term unemployment and reducing the cost of living.  

Jamie Broderick CEO of UBS Wealth Management said: “We are really excited about supporting Resonance to develop the first SITR fund in the UK. Following a very successful launch of our UK Philanthropy services in 2014, we wanted to widen the opportunities for our clients to use their wealth to deliver a positive social impact.

“The SITR fund will hopefully enable them to do this whilst as the same time realising a clear financial return.  

“Inner city poverty is all around us and we want to be part of the solution. This has been the aim of our Community Affairs program in Hackney for over 25 years. History has shown that we cannot expect Governments and charitable organizations to resolve enduring social issues on their own.

“The SITR fund will hopefully connect capital markets to the social sector and that offers a potentially innovative agent of change. We want our clients to have access to this sort of thought leadership and practical social investment opportunity.”

Resonance produced a report in October 2014 that summarized the work it had undertaken over a period of 12 months with the view to developing a city focused Social Investment Fund in Bristol.

With the support of UBS AG, Resonance says the plan is now to grow £30m+ of SITR Funds in cities across the UK over the next 2-3 years with Bristol as the first.

“Bristol is one of the UK’s first Social Enterprise cities and Resonance has already identified more than a dozen social enterprises (SE) capable of receiving SITR investment in the city,” Daniel Brewer, Managing Director at Resonance, said.

“This follows an 18 month pilot phase including transacting the first ever SITR deal between a small group of angel investors and ‘FareShare South West’, who divert food waste to organizations working with vulnerable people.

“There is a real opportunity for funds to address the problems of inequality in our cities where deprivation and wealth live in close proximity.  

“Social Investment Tax Relief is the key to the development of these funds. It simultaneously drives down the cost of capital (the fund’s will offer loans with interest rates between 4 per cent and 7 per cent, unsecured) for social enterprises who need funding to scale up the impact of their projects, and reduces the risk for investors in that they receive 30 per cent of their return up front through the tax relief.”

Case study:  FareShare South West

In the first deal of its kind in November 2014, Bristol based charity FareShare South West, which tackles food waste, received an investment of £70,000 from a small group of angel investors piloting a social investment tax relief (SITR) fund, to be set up and managed by impact investment company Resonance.

The Bristol pilot was set up to identify the demand for social investment from local social enterprises, and to understand how different fund structures might impact on scaling up the social impact achieved by investees.

Seen as a potential way of providing a vehicle to channel the city’s wealth into the growth of social enterprises that are successfully tackling social and economic deprivation at the heart of local communities, the pilot had an initial investment pot of £200,000.

The first beneficiary, FareShare South West, diverts surplus food that the food industry would otherwise waste, to organizations that work with vulnerable people. They have also developed a catering arm, where surplus food is used to provide a fine dining experience at festivals and larger scale events, as well as general catering services at smaller events. FareShare also offers work experience and job opportunities for vulnerable individuals who have been excluded from the jobs market.

Jacqui Reeves at FareShare South West said: “We needed investment to scale up our activities and to achieve our aims of addressing the imbalance by redistributing quality surplus food to groups working with vulnerable individuals in and around Bristol. The investment will help us create real jobs and work experience opportunities for vulnerable people who previously were unable to work.”

Matt Robinson, Head of Strategy and Market Development at Big Society Capital, said: “This is a milestone moment for the social investment tax relief. It is particularly exciting to see it being used in the way it was intended: enabling a small charity to access unsecured lending, so that they can grow and increase their social impact.”