Wealth Manager UBS has today announced that it is sponsoring social impact investment specialist Resonance to develop the first in a series of Social Investment Tax Relief (SITR) funds in cities across the UK.

The first SITR fund aims to launch in Bristol In the first quarter of 2015, and the vision is for six to eight more funds in cities with a likely next one focused on Manchester. Each SITR fund will launch with around £5m to invest in local Social Enterprises, and if Brussels sanctions the UK government’s Autumn Statement proposals to extend the scheme then each fund could be considerably larger.

The SITR funds will harness a new government initiative to empower social enterprises to tackle inner city poverty while still providing a risk-adjusted return to investors. Some of the social issues that investees will tackle include: job creation, skills development, debt reduction & support, improved standards of living, health & well being, addressing the needs of addicts and ex-offenders, improving access to affordable accommodation, alleviating long-term unemployment and reducing the cost of living.

Jamie Broderick CEO of UBS Wealth Management said: “We are really excited about supporting Resonance to develop the first SITR fund in the UK. Following a very successful launch of our UK Philanthropy services in 2014, we wanted to widen the opportunities for our clients to use their wealth to deliver a positive social impact. The SITR fund will hopefully enable them to do this whilst as the same time realising a clear financial return. We spoke to a number of different social impact investment intermediaries and Resonance is clearly the market leader in this area.

“Inner city poverty is all around us and we want to be part of the solution. This has been the aim of our Community Affairs programme in Hackney for over 25 years. History has shown that we cannot expect governments and charitable organizations to resolve enduring social issues on their own. The SITR fund will hopefully connect capital markets to the social sector and that offers a potentially innovative agent of change. We want our clients to have access to this sort of thought leadership and practical social investment opportunity.”

Resonance produced a report in October 2014 that summarized the work it had undertaken over a period of 12 months with the view to developing a city focused Social Investment Fund in Bristol. With the support of UBS AG, the plan is now to grow £30m+ of SITR Funds in cities across the UK over the next 2-3 years with Bristol as the first. Bristol is one of the UK’s first Social Enterprise cities and Resonance has already identified more than a dozen social enterprises (SE) capable of receiving SITR investment in the city. This follows an 18 month pilot phase including transacting the first ever SITR deal between a small group of angel investors and ‘FareShare South West’, who divert food waste to organizations working with vulnerable people.

Daniel Brewer, Managing Director at Resonance, said: “There is a real opportunity for funds to address the problems of inequality in our cities where deprivation and wealth live in close proximity. I am delighted that UBS has joined forces with us to develop these funds. Bristol is a perfect place to start as it benefits from a well-organized group of social business angels who are passionate about channelling their wealth and skills into social enterprises and who we have already worked with during the pilot phase.

“Social Investment Tax Relief is the key to the development of these funds. It simultaneously drives down the cost of capital (the fund’s will offer loans with interest rates between 4% and 7%, unsecured) for social enterprises who need funding to scale up the impact of their projects, and reduces the risk for investors in that they receive 30% of their return up front through the tax relief.”