Charities Aid Foundation raises £20m on London Stock Exchange

Charities Aid Foundation (CAF) has raised £20m in retail bonds listed on the London Stock Exchange with the support of social finance charity Allia.

The bonds were issued by Retail Charity Bonds, a PLC created by Allia, and were heavily oversubscribed in only three working days, meaning the issue closed early. This is the third bond to be issued through the Retail Charity Bonds platform, which was created to enable UK charities to raise medium term debt finance through bonds issued to retail and wholesale investors.

Following the launch of the CAF Bond John Low, CEO of CAF, was invited to open the London Stock Exchange last week. At the event he told Pioneers Post: “There is something quite special about being able to issue a retail bond because you have a large number of supporters, the performance of the bond listed on the London Stock Exchange and it’s possible to see what’s happening in a very transparent way. We would encourage other charities to consider it. It’s not right for everyone but if it fits your model and the work you’re doing, definitely go for it.”

CAF is one of the largest providers of philanthropic services to charities and donors worldwide. It provides banking and fundraising services to charities, helps private sector businesses increase the social impact of their activities and helps individual donors ensure the money they give achieves the maximum social impact possible.

Here’s a chance for us to have capital behind us that we can lever for the benefit of more charities

For those struggling to navigate their way through the financial terminology used in this type of social investment, retail bonds are essentially IOUs – “an investor agrees to loan money to an individual, company or government in exchange for a predetermined interest rate.” Thanks to the Retail Charity Bonds platform, money can now also be loaned to charities.

Low continued: “There is only one London Stock Exchange… somehow it has always seemed to be for the private sector, for private wealth creation. On the side of that wealth creation there was always philanthropy… but today charities have a place alongside commercial entities. Here’s a chance for us to have capital behind us that we can lever for the benefit of more charities.”

The Bonds had a minimum initial subscription amount of £500 and were available in multiples of £100 thereafter – they will pay a fixed rate of interest 5% per annum. The Bonds are expected to mature in April 2026 with a final legal maturity on 12 April 2028, but at any time between now and then investors are permitted to sell the Bonds on the open market through their stockbroker.

Simon Bond manages the Columbia Threadneedle UK Social Bond Fund, which was one of the funds to invest in CAF. He explained: “CAF gave us access to the sorts of charities that wouldn’t normally be able to issue through the bond market… We’re particularly interested in those investments that do good for society and in this case there was a clear alignment of interests between what the fund is trying to do and what CAF is doing. An investment in CAF not only gave a financial return but also does good for society.”

The social investment market has received criticism from some for being too exclusive to ultra high networth individuals and mainstream investors. In an interview with Pioneers Post in April last year director of social finance at Allia Phil Caroe explained that the Retail Charity Bond platform aims “to gradually help to introduce social investment into the portfolios of more and more mainstream investors”.

In an interview last week he expanded on this: “It (the Retail Charity Bond platform) is certainly moving things. The retail bonds are still not your 'everyman on the street' investment opportunity. To invest in a retail bond, you’re probably someone who has a certain amount of savings, some capital, that you are actively managing rather than just putting it in the bank… It is often your mid to high networth individuals, but it’s certainly not just for ultra high networths or angel investors looking at making substantial investments.”

Low concluded by explaining in more detail what the £20m raised will be used for. “CAF operates in the UK and across the world. We work with large numbers of donors and charities and business. We will be able to lever this money to really grow our work to benefit charities as we lend more to them as they develop their programmes… but also we’ll be able to help those who want to give in new ways, using new technologies, attracting young donors,” he said.