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Scope Launches New Bond Programme

October 31, 2011

Broadening their horizons…

Scope, the disability charity, is to break new – and potentially controversial – ground by launching a £20m bond programme this week to create new source of funds for its activities.

It will be one of the first UK charities to enter the capital markets, this one through a tie-up with the Bank of New York Mellon Corporation, which it believes could provide a template for others to follow.

The Scope Bond Programme will list on the Luxembourg-based Euro MTF stock market and follows last year’s launch of the Grangewood Venture Philanthropy Project where outside investors were brought in to finance the construction of homes for people with multiple disabilities.

“The major cash investment that we hope to generate through the Scope Bond Programme has the potential to transform the support we can provide to disabled people,” said Richard Hawkes, chief executive of Scope.

“It gives us the opportunity to talk to a new and emerging network of prospective supporters and offer them an additional way of investing in Scope alongside traditional donations and philanthropic loans. This is a landmark development for Scope and could revolutionise the way we and other large charities raise finance for our work in the future.”

So-called Social Impact Bonds have also been trialled by the prison service and other public institutions as a way of raising money from private sources but individual charities have rarely used them. Bonds are more typically used by governments or large corporations to raise money as a form of debt.

The Charities Commission, which oversees such organisations, said it had just issued new guidance to charities encouraging them to look at new ways of improving their financial or operational efficiency.

Scope says the bonds which will be aimed at attracting high net worth individuals and larger institutions rather than small retail investors. It also dismisses fears that City-style financing of charitable bodies could undermine the image of Scope or lead it into debt.

“This allows us to accelerate the work we already do and will allow investors to put their money into an investment with clear social benefits and not just financial returns,” explained Scope finance director Geetha Rabindrakumar.

The Scope programme will operate in the same way as similar corporate bond products although the rate of return or “coupon” is likely to be lower. Scope will have the flexibility to issue sterling bond tranches at varying nominal amounts, maturity dates and coupon rates under the programme.

Scope reports income of more than £100m a year with £23m of that coming from its network of charity shops, £15m from traditional donations and the rest from providing services to the public sector. About 3,000 people are employed by Scope which made a surplus of £4m in 2010.

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