Investing in companies who put social impact at the heart of their mission – the first ethical VCT?

The FSE Group and Social Finance Limited have recently launched the Social Impact Venture Capital Trust (VCT) to invest in socially-motivated businesses. The fund provides one of the first opportunities for both retail and High Net Worth investors to access the growing social investment market, whilst benefitting from a 30% income tax relief on initial investment and tax-free dividends.

The VCT will focus on investing in socially-driven companies that are either established or whose revenue streams are expected to be underpinned by delivery contracts. Example companies include HCT Group (bus and community transport provider), Bromley Healthcare (social care company) and Careers Development Group (Welfare to Work employment contractor).

The Social Impact VCT is seeking to raise £20 million, with a first close target of at least £6 million. Its stated financial aims are to preserve capital, deliver tax-free dividends from year 2 onwards and return capital in years 6, 7 and 8. The fund hopes to provide annualised returns of 2-3% post costs, giving a pre-tax equivalent return of 8% inclusive of the upfront 30% income tax relief.

Investing in Venture Capital Trusts has historically been the preserve of wealthier private investors looking for a tax efficient investment with the potential to yield income and capital growth. It remains to be seen if there is a market for impact investments targeted at ethical

John Ditchfield (EIA Co-Chair)