The Community Shares Underwriting Fund (CSUF), created and managed by social investment experts Resonance, has today received a £1 million investment from Big Society Capital.
With further investments totalling half a million pounds from Barrow Cadbury Trust, Panahpur, Friends Provident Foundation and the Golden Bottle Trust, together with an initial investment of half a million pounds from Esmee Fairbairn Foundation, this expands the Fund’s total value to £2 million, making it the largest of its kind in the UK. Big Society Capital may also commit a further £1 million, if demand for the fund exceeds expectations in the next 12 months.
Community shares allow local people to become part-owners of their local assets and services and to develop new projects which serve local needs, including community shops, business hubs, affordable housing, farms, sports centres, pubs and renewable energy projects. Since 2009, over 200 projects have raised finance through community shares, with a total value of nearly £40 million.
The CSUF has been designed to support more equity being raised in community share offers, by providing an “underwriting” facility that can top up a shortfall if the target amount for the share offer is not reached. The top up funding is provided in the form of a flexible, interest-only loan, which can be repaid from future community share issues once the project is up and running. Having this kind of backing dramatically increases the likelihood of projects going ahead. This allows community groups to be more ambitious in the scale of share offer they can launch, bringing more of the financial benefits to their community shareholders and the wider community. It also encourages participation in the community share offer by increasing confidence that the project will actually proceed.
The expansion of the fund follows a pilot scheme which provided underwriting offers to six projects, of which three have opted to draw down some of the top up loan funding to allow their projects to proceed, and enabling them to unlock almost £4 million of project finance in total.
In one project, a group of Oxfordshire residents used £150,000 of top up loan funding from the CSUF, to supplement £550,000 raised through community shares to set up the Osney Lock Hydroelectric scheme. The project will reduce the community’s carbon emissions and generate income to fund future local environmental projects. Over time, the Osney Lock project will repay the CSUF loan through raising additional community shares once the project is operational.
Simon Chisholm, Investment Director of Resonance, said “Community Share Offers are empowering local community groups around the country to get beneficial projects off the ground, and re-connecting smaller investors with tangible investments in their own communities. We’re delighted that the next round of this fund will be able to provide even more support to these initiatives, and encourage communities undertaking a share offer to get in touch.”
Nick O’Donohoe, Chief Executive of Big Society Capital said: “Around the UK there is an increasing demand from local communities to work together to secure important community assets. Many of the larger scale projects may face hurdles and miss their financing targets, this fund covers 50% of that funding gap, allowing them to get off the drawing board faster.”
Simon Borkin, programme lead at of the Community Shares Unit said: “With backing from Department for Communities and Local Government, the Community Shares Unit is supporting the growth of this valuable form of finance which is offering local people real and meaningful ownership of valued assets. Now as more communities from wider backgrounds and varied sectors turn to community shares, funds like this can play a valuable role by ensuring projects go ahead when timescales are tight, as well as giving more supporters the confidence to participate in often pioneering social ventures.”