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Socially R esponsible Investment Using retail eligible bonds

Socially R esponsible Investment Using retail eligible bonds. 8 th October 2014. Socially Responsible Investment Opportunity Investor base Using the Retail Charity Bond Platform The benefits for housing associations. A largely untapped market. Socially Responsible Investment.

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Socially R esponsible Investment Using retail eligible bonds

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  1. Socially Responsible InvestmentUsing retail eligible bonds • 8th October 2014

  2. Socially Responsible Investment • Opportunity • Investor base • Using the Retail Charity Bond Platform • The benefits for housing associations

  3. A largely untapped market • Socially Responsible Investment "The first 600 times I heard about impact investing, I thought 'tree huggers’. But the ability to use one's capital to support what one believes in without giving up performance is becoming increasingly appealing." (1) • A largely untapped market • A very wide investor base • SRI funds run by household name managers • Retail investors • Conventional wholesale investors • Shortage of investments with positive social impact • Most funds negatively vet • Positive impact funds out perform • Need conventional investment • A normal listed bond or equity • Generating a commercial return • Plus as social impact statement Ethical/ ESG Market £12.2bn + (2) Positively vetted social impact investors Sallie Krawcheck, former head of Bank of America's global wealth and investment management division at Reuters Global Wealth Management Summit Reuters 7 June 2013 EIRIS estimate as at 30th June 2013 based on around 80 UK domiciled green and ethical retail funds

  4. Socially Responsible Investment • Housing associations are ideal candidates • Commercially run for social benefit • Non distributing • Clear social/charitable purpose • Well managed • With additional social benefit • Strong credits • Good operating ratios • Income generating and Asset backed • Regulated • Mainstream • Borrow from banks • Issue bonds Simple Cheap Flexible

  5. Tapping into the widest possible market • Looking for medium term investments with social impact • Commercial return • Medium dated (7-15 years) • Normal bond or equity • Listing on stock exchange • Small denomination • Social impact statement • No need for rating • No need for security

  6. Wide distribution • Institutional SRI Funds and Charity Fund Managers and Retail Distributors Killik & Co

  7. The SRI Bond Market • Expanding the Investor Base Golden Lane Retail Charity Bond Investors in A2D’s last retail eligible bond issue Greater grass roots involvement

  8. Available for large and small transactions • Accessible through two routes • Direct own name issue • Own name bond issue • Unsecured • Can be used anywhere in group for any purpose • Cost effective at £50m + • Rating preferred • 6-8 week lead time • Simple covenants Borrowing through Retail Charity Bonds Loan with RCB plc but own branding on bond issue Unsecured Can be used for non core, charitable/community activities Cost effective at £10m + No rating required 8-10 week lead time Simple covenants

  9. Retail Charity Bonds • The purpose Raising £10-50m unsecured loan finance from ethical investors through bonds listed on London Stock Exchange

  10. Retail Charity Bonds • Who it’s for • Established charitable organisations • Strong credit worth • Seeking £10-50m for charitable purposes • Typically looking to acquire capital assets, invest in facilities or finance existing assets more efficiently

  11. Retail Charity Bonds • What it offers • Established issuing structure • Independent review process • Standardised documentation • Bond administration managed by Allia

  12. Retail Charity Bonds • How it works Investments in bonds Loan Retail Charity Bonds PLC Investors Charity Bond interest and principal Loan interest and principal + fees Allia (Servicer)

  13. Retail Charity Bonds • Golden Lane Housing Bond Providing homes for people with a learning disability Offered 4.375% for 7 years Raised £11m in 8 days 60% retail, 40% institutional

  14. What is the relevance to housing associations • Simple Cheap • Bond Issue…..BUT with no security Funding for development Available in small & large amounts Funding for Commercial activities 4 to 4.5% fixed 7 to 12 Year Term Flexible Makes use of social value added Can be lent anywhere in group Lightly covenanted Value from unchargeableassets

  15. Summary • A large market • Accessed widely through retail eligible products • Directly or through Retail Charity Bonds • Simple, flexible and cost effective • Maximising use of social value

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