Mounting fears over the mis-selling of SRI products | Blog | Foundation East

Mounting fears over the mis-selling of SRI products

24th January 2019 By Katy Ford in Current Affairs, Tax Relief

Back in November, we drew attention to the surge of interest in socially responsible investment (SRI), highlighting our own Community Investment Tax Relief (CITR) offering. Last week, Responsible Finance, the membership body to which all responsible finance providers, including Foundation East, belong, shared a case study exploring how Charity Bank uses the CITR scheme.  Then, this week, whilst confirming a surge of interest in SRI,  the Financial Times (FT) reported that financial advisers have expressed worry over possible mis-selling of SRI products.


It’s time to revisit the facts …

This week, the FT reported mounting fears over the mis-selling of SRI products, urging that responsible investment ‘must be based on strong foundations’. Indeed, Neville White, head of research into sustainable and responsible investment at EdenTree, the £2.8bn asset manager that sponsored the research referred to by the FT, compared the mis-selling of SRI products to that of payment protection insurance (PPI) in the UK. He claimed that booming interest in ethical investment was tempting some managers to relabel products to capture a slice of the market. 

As one of a handful of responsible finance providers accredited by the UK government to offer CITR on its shares, we feel duty bound to reassure investors (existing and potential) that this scheme is in no way a re-labelling exercise. CITR is, in fact,  built on the strongest of all SRI foundations and is less risky than you may think, as explained in our previous blog, ‘Want to do Socially Responsible Investment?’.

In this blog, we also answered questions including:

  • Who’s doing what to clarify the relationship between SRI and performance?
  • How can individuals and organisations reduce the risk of financial return when doing social impact investing?
  • What is the government’s CITR scheme?
  • What type of social impact is the CITR scheme enabling?
  • What is the expected return on investment (ROI) of investing in Foundation East CITR shares?
  • How does investing in Foundation East CITR shares bring economic returns to your community?
  • How does investing in Foundation East CITR shares bring social returns to your community?
  • How does investing in Foundation East CITR shares bring you a financial return (of 25% over 5 years equating to a pre-tax return of 6.41% for standard payers, 7.14% for corporate tax payers and 8.33% for higher rate tax payers, incidentally)?

Charity Bank’s CITR shares are making a powerful social impact …

Given this recent refocussing on the mis-selling of SRI products, we think it’s time to restate the facts associated with the strong foundations of CITR shares, first by reviewing Responsible Finance’s Charity Bank case study, which evidences how Charity Bank’s CITR shares are making a powerful social impact. To quote directly:


Through the CITR scheme Charity Bank has been able to invest its CITR account holders’ money into hundreds of community projects, thereby helping regenerate disadvantaged communities and improve lives.

CITR deposits with Charity Bank become part of a social mission: they might be used to support people with learning disabilities and their familiesoffer young people a chance to re-engage with education, or to redevelop a community sports and training centre.

In its latest social impact survey, 97% of the bank’s borrowers said that their Charity Bank loan had contributed towards the achievement of their mission and 74% said the project would not have happened without Charity Bank’s support.”

Regarding lessons learnt, directly quoting once more:

“Charity Bank’s experience is that once investors (especially higher or additional rate taxpayers) are aware of the scheme, the market-leading returns earned (whilst benefitting from FSCS protection up to £85k), coupled with the knowledge their funds are being used to benefit society, proves very appealing. Given this framework, investing in CITR is less risky than using Social Investment Tax Relief (SITR) and other investments with a similar return, where capital is at risk.”

Foundation East’s CITR shares are making a powerful social impact …

Our own track record is just as strong. We achieve £15 social and economic impact for every £1 we spend supporting small business and social enterprises in the eastern region. It’s this business focussed impact that differentiates our CITR offering from Charity Banks’ (investments made into CITR instruments at Charity Bank will only benefit charitable organisations, whereas Foundation East’s benefit the wider business community) alongside the regional nature of our support.

And, whilst there is no Financial Services Compensation Scheme (FSCS) guarantee when buying Foundation East CITR shares, the loans we make to SMEs are underwritten using the UK government’s Enterprise Finance Guarantee (EFG) (where eligible). Therefore, like Charity Bank’s offering, Foundation East’s CITR shares are not as high a risk as alternative SRI offerings, including those from peer to peer (P2P) sites, such as Lendy, the crowd-funding property lending platform, for example. 

Our 14 year track record proves so.

Invest in Foundation East CITR shares …

So, if you’re interested in minimising the risk of social impact investing, please consider  investing in out CITR shares!

Want to find out more about the impacts you can help us to make SMEs in the Eastern region? Read our annual review

Want to find out more about CITR? Click here.

Want to invest in our CITR shares? Click here

  • About the Author
    Katy Ford

    Katy Ford

    Katy’s knowledge of community finance is extensive, having worked for Foundation East since its inception in 2004. She is recognised locally as an influential business leader by the Suffolk 100 and nationally, as a founding member of AskIf, an online network of community-based lenders. Previous to moving across to community finance, Katy was the treasury manager for a large insurance company. She also has experience as a SME owner, having run a small hotel.

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