The disability charity Scope became the first operational charity to issue bonds yesterday when it closed the first issue of its £20m programme.
The £2m raised by the first tranche of bonds will go towards plans to open 100 new charity shops over the next five years and expand its fundraising programmes to recruit more regular donors.
Investors in the bonds include the investment management firm Rathbones, the grant-making charities the National Endowment for Science, Technology and the Arts and the Esmée Fairbairn Foundation, and the social investor Panahpur.
Investors will earn 2 per cent interest a year and the bonds mature in three years, when their investment will be repaid.
The issue comes after the registration of Scope’s bond programme on Euro MTF Stock Exchange Luxembourg last year.
Geetha Rabindrakumar, director of finance at Scope, told Third Sector: "We had a huge amount of interest, and from different sectors – that is what is really exciting about it. There were high net worth individuals, charitable trusts and foundations as well as wealth managers. Not all the investors were in a position to invest at this point, so we hope the issue will kick start the market and help it to grow in future."
She said Scope wanted to raise funds through a bond issue rather than other means in order to connect with new groups of investors and test whether it could be done on a larger scale in future.
She said the charity would make spending and development plans for its services before deciding when to issue the next tranche of the bond. Up to £20m of bonds could be issued over the next five to 10 years.
Geoff Burnand, chief executive of the investment consultancy Investing for Good, which arranged the bond issue, said investors had been attracted by a blend of social and financial returns and the response "bodes well for the future of the social investment market".
Bryn Jones, fund manager at Rathbone Unit Trust Management, said the firm had invested in the bond because it met the social wellbeing and ethical criteria of its ethical bond fund.