Schroders social impact fund falls short of its IPO goal

London — A Schroders fund focused on social impact projects raised £75m in its initial public offering (IPO), a quarter less than targeted, as fund listings struggle to attract demand in the UK’s laggard stock market.

Schroder BSC Social Impact Trust, which starts trading on Tuesday in London, targets specific social results and allocates capital to effect change, while also seeking a financial return.

While traditional environmental, social and governance (ESG) investment strategies focus on avoiding sectors and stocks seen as harmful, impact investments seek to address issues including homelessness, supporting people with learning disabilities and providing housing for survivors of domestic abuse.

The listing is a response to the pandemic worsening issues like domestic abuse and homelessness, Jeremy Rogers, chief investment officer at Big Society Capital, Schroders’ partner on the fund, said. Private equity behemoths like Apollo Global Management and large asset managers such as BlackRock helped boost impact investing to a $715bn market.

Still, the fund fell short of its initial £100m target. Another Schroders fund, Schroder British Opportunities Trust, last month managed to raise only a third of its goal, despite what it called a “once-in-a-generation opportunity” to invest in UK companies.

The FTSE 100 index is down about 15% this year, one of the worst performances among European markets.

“Though ESG is the flavour of the moment, a shrinking UK economy and difficult talks to exit the EU have made it difficult for British funds to raise money,” said Oliver Brown, a fund manager at RC Brown.

Brown invested in another fund IPO in London, Ecofin US Renewables Infrastructure Trust, which said on Friday it raised $125m, about half of its initial target.

“This is just the start and the fact that these funds are raising any money at all is a positive because they can come back to market at a later stage and raise more,” he said.

Schroder BSC aims to scale the fund to £500m over five years and is looking to provide a net asset value total return of inflation plus 2% annually.

Bloomberg