Want to do Socially Responsible Investment? Choose CITR Shares ... | Blog | Foundation East
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Want to do Socially Responsible Investment? Choose CITR Shares ...

5th November 2018 By Katy Ford in Current Affairs

What a month October was for the socially responsible investment (SRI) sector. Kicking off with #GoodMoneyWeek it ended with wide press coverage of a report from Albion Capital revealing how consumers demand the investment industry offers SRI opportunities, yet will not 'do' SRI if it means risking investment return. In this blog, I share what the government and investment industry are doing to try to change this. I also show-case the positive impacts Community Investment Tax Relief (CITR) schemes make with minimal risk to those investing…

Research shows that, whilst more than half of people in the UK are interested in purchasing social impact investment products, only nine percent have done so. Albion Capital, in its effort to uncover why, revealed in a recent report that, although investors request SRI opportunities, they are reluctant to invest in them at the expense of financial returns. 

The report also evidences that those who are willing to invest in SRI products are most likely to plough their cash into products focused on healthcare, the environment and infrastructure and least likely to invest in the areas of housing and socially positive technology.

FT Advisor quotes Patrick Reeve, managing partner at Albion Capital, as saying: "There is a lot of confusion at the consumer level, where people want to support socially responsible causes but don't necessarily understand the relationship between SRI and performance."

This begs the question, who’s doing what to clarify the confusion?

Who’s doing what to clarify the relationship between SRI and performance?

We’re delighted that Albion Capital and other members of the Advisory Group to Government on Social Impact Investing are looking into this. We’re pleased too that 22 industry leaders have committed to the following goals, aiming to bolster social impact investing in the UK.

1. Improve deal flow and the ability to invest at scale.
2. Strengthen competence and confidence within the financial services industry.
3. Develop better reporting of non-financial outcomes.
4. Make it easier for people to invest.
5. Maintain momentum and build cohesion across initiatives.

To me, ‘developing better reporting of non-financial outcomes’, seems key to changing consumer’ perceptions, ‘making it easier for people to invest’ crucial to changing consumer behaviour. I want to commend those firms that have pledged their commitment to social impact investing and explain one way for individuals and corporates to minimise risk when doing social impact investing. 

Companies committed to the Government Advisory Group on Impact Investing’s goals:

Aberdeen Standard Investments
Albion Capital
Allianz Global Investors
Architas
Barclays
Big Issue Invest
Big Society Capital
CFA UK
CFA Institute
Columbia Threadneedle Investments
Esmee Fairbairn Foundation
Hermes Investment Management
Janus Henderson
Legal & General Group / LGIM
M&S Bank
M&G Investments
Social Finance
St. James's Place
Triodos Bank UK
Virgin Money 

Whilst these organisations and the wider task force progress with their valuable work, I’d like to share with you a way that individuals and organisations can ‘do’ SRI that minimises the risk of financial return now. 

 

How can individuals and organisations reduce the risk of financial return when doing social impact investing?

It’s quite simple really: invest via accredited Responsible Finance Company, Foundation East and benefit from a minimum of 5% tax relief per year using the UK Government’s CITR scheme.

 

What is the government's CITR scheme?

The UK government’s CITR scheme provides a tax incentive to investors who wish to use their money to make positive social change in under-invested communities. The incentive is available to individuals and companies that invest in Community Development Finance Institutions (CDFIs) or Responsible Finance providers, as they are more commonly known.

The tax relief reduces the investor’s income tax or corporation tax liability and is worth up to 25% of the money invested, spread over five years. To obtain maximum tax relief under the scheme investors must hold the investment for at least five years.

 

What type of social impact is the CITR scheme enabling?

The CITR scheme, by design, creates positive social, financial and economic impacts in businesses, social and community enterprises within under-invested areas. 

Foundation East is accredited to offer CITR on its shares. £15 social and economic impact is achieved from every £1 it spends supporting small businesses in the eastern region.  Invest in Foundation East shares and get to see this impact in your community. 

Many of our clients are SMEs and social enterprises focussed on healthcare and the environment. 

Foundation East environmental impact clients include: Arjun Technology VenturesCabello Hair & Beauty and Bee Bee Wraps

Arjun Technology Ventures, a tech start-up social enterprise, launched in 2015 with its innovative ‘software-as-a-service’ subscription- based business, Kisanhub.

 
Kisanhub provides all the information farmers need to grow more crops and use less resources, wherever they are in the world. 

Market-ready, they required a cash injection of £100,000 to help them meet clients’ needs whilst completing an investment round.

“Thanks to Foundation East we were able to secure £100k of loan funding at an important time for our business. We required this money to scale up our operations to meet our clients’ immediate needs. Foundation East were fantastic in understanding our business and could see the potential in what we were doing for UK farming.” 

Giles Barker, Founder, Arjun Technology Ventures.

Foundation East healthcare clients include: Cambridge Community Arts; Recovery Hub Ipswich; Boston Body HubGene Advisor; Barefoot Birthpools; Sunflowers Care; KSP Consultancy; Scoliosis; Ultimate Care and Heritage Care at Home.

Boston Body Hub is a community gym and healthy cafe that fills a gap in healthy living provision in an area with a higher than national average level of obesity, inactivity and smoking related health issues.

“Finding start-up funding was difficult. We needed enough to cover premises, equipment deposits and working capital. When we contacted Foundation East, we were close to giving up. We couldn‘t believe it when they offered us a loan and introduced us to Cambridge Social Ventures, who also helped with finance and support.”

Debra O'Neil, Founder, Boston Body Hub CIC

 

What is the expected return on investment of investing in Foundation East CITR shares?

Investing in Foundation East CITR shares brings social and economic returns to the East of England and financial returns to investors.

 

How does investing in Foundation East CITR shares bring economic returns to your community?

Your investment helps to:

Support the development of local businesses
Safeguard existing jobs and create new jobs
Relieve the pressure on the public purse through reducing benefit claims
Increase local taxes being paid to the local authority by increasing local economic activity
Achieve a proven economic return of £15.68 for every £1 spent 

How does investing in Foundation East CITR shares bring social returns to your community?

An investment by us into a small business enables the business owner to:

Fulfil their personal ambition to become an entrepreneur
Change their lives and the lives of their families for the better
Improve their business and life skills by empowering them to make better decisions
Improve their personal well-being and personal circumstances

How does investing in Foundation East CITR shares bring you a financial return?

When you invest in Foundation East CITR shares, you can claim 5% of your investment back from HMRC each year for 5 years. This equates 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:

  • An investment of £25,000 over a five-year period would enable a corporate tax payer to reduce its tax bill by £1785 per year or £8925 over a five-year period.
  • An investment of £25,000 over a 5-year period would enable a higher rate tax payer to reduce their tax bill by £2,275 per year or £11,275 over a five-year period.

An investment of £250 over a five-year period would enable a standard rate tax payer to reduce their tax bill by £16 per year or £80 over a five-year period.

Is investing in Foundation East CITR shares risky?

You may think that because Foundation East borrowers have difficulties getting affordable finance for their projects from commercial banks, they are inherently risky. Our end of year figures for the last 14 years show this not to be so. 

This is because all our lending decisions are made locally, by people, not by computers. We put a great deal of work into building and maintaining relationships with our clients and by so doing, we minimise the default rate that we incur. And because we underwrite eligible loans with UK Government’s Enterprise Finance Guarantee (EFG), the default rate is minimised further. 
Please invest.

  • 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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