Charitable Bond to fund regeneration projects
£10 million investment in regeneration and affordable housing.
The Scottish Government will make innovative use of financial transactions funding by investing £10 million in a Charitable Bond.
Reinforcing the Scottish Government’s support for community-led regeneration, the investment in a Charitable Bond will generate over £1 million grant funding for the over-subscribed People and Communities Fund and lend almost £9 million to a Registered Social Landlord to build 150 affordable homes in Scotland.
The People and Communities Fund supports community-led regeneration to deliver a wide range of employability and preventative action outcomes for the benefit of local people and communities.
The Charitable Bond model was developed by Allia, a community benefit society which has been issuing these bonds since 1999, and has the twin advantage of generating a grant for charities and funding affordable housing. By using financial transactions funding creatively, and being the first major Scottish investor in a Charitable Bond, the Government is able to generate grants for charities to support the most disadvantaged communities in Scotland.
Under existing loan facilities with Allia, approximately £8.6 million of the £10 million investment in an Allia bond will be loaned to Places for People Homes Limited, a subsidiary of Places for People Group. The loan proceeds will then be utilised by Castle Rock Edinvar Housing Association, also a member of the Group, to fund the development of 150 affordable homes in Scotland.
The Scottish Government is currently consulting with existing applicants to the People and Communities Fund about going forward via this new funding route.
Speaking at the Local Government and Regeneration Committee, the Minister for Housing and Welfare Margaret Burgess said:
“This investment is an innovative way of generating additional funding for Scotland’s most disadvantaged communities. It will be used to support projects and services that will benefit our local communities. I’m delighted too that our investment will be helping deliver much-needed affordable housing in Scotland.
“This is the first major investment in Charitable Bonds in the country, this Government is taking the initiative, however with full economic levers we could deliver more support for the poorest communities.
Tim Jones, Chief Executive of Allia, said:
“We’re delighted to see the Government leading the way with what is both the first major Scottish investment and the largest investment in a Charitable Bond to date. We hope that many more Scottish companies and individuals will follow their lead and add their own investment to support charities in Scotland.”
Managing Director of Castle Rock Edinvar Alister Steele said:
“Not only will this new way of borrowing loan finance support Castle Rock Edinvar’s development of 150 new homes across Central Scotland, it provides additional benefit by directly assisting the regeneration of communities in Scotland.”
The Charitable Bond offer will open for investment by the public later this year.
This £10 million is part of an additional £290.8 million of financial transactions funding, restricted to loan and equity investment, coming out of the UK Budget. This is not additional capital grant to the Scottish Government but is additional loan fund money that can’t be invested directly and must be repaid to the UK Government. By using this money creatively and investing it in a Charitable Bond the Scottish Government is able to convert part of it into grant funding for charities and provide loan finance for affordable housing in Scotland. The grant element is a one-off payment for charities and does not have to be repaid to UK Government.
Charitable Bonds are an ethical investment product where the margin usually paid as interest to the investor, tax or profit to shareholders, is released as grant funding to charities on day one of the investment. Charitable Bonds were developed by Allia, a community benefit society based in Cambridge, and have been used successfully to raise money for charities in England and Wales over the last ten years.
Scottish Government’s investment of £10 million in a Charitable Bond will generate around £1.4 million in grant for charities. This grant is being used to fund People and Communities Fund projects. The £8.6 million loan element of the investment will be used by Castle Rock Edinvar Housing Association to develop 150 new affordable homes in Scotland.