Getting social – how to become a social investor

Written by on 14th Jul 2016

Want your money to have a positive impact on people or the planet as well aiming to generate a return? If you’ve not yet dipped your toe into social investment then you could be missing out.

Social investment is where investors’ funds are directed towards charities, social enterprises or environmental projects, in the main, to fund plans to access new income streams, often as a result of government cuts, or simply to help them grow. It is a new, but growing area for investment.

But do bear in mind that these investments are considered high risk and your capital may be at risk. The repayment of any capital or income depends on the continued success of the organisation you invest in, and is therefore not guaranteed.

2014 saw a total of £248 million of direct social investment, according to Ethex’s Positive Investing report. This had increased by 33 per cent to £330 million in 2015.

Social investment has until recently been the preserve of wealthier investors. However, with more opportunities and a broader range of opportunities available on an increasing number of platforms, as well as lower minimum investment amounts, more and more investors are choosing investments with a positive social impact.

And, though you might say that individual investors have got there first, the fact that large investors such as private banks – not often known for their progressiveness – have begun joining the party over the last couple of years means that the sector is only likely to grow further.

While some banks, stranded oil businesses, tax-avoiding global tech firms or emissions-manipulating motor manufacturers have been having a rough time of it, through their more values-based corporate structures, social organisations now provide an interesting alternative to FTSE stalwarts.

So what’s out there for socially-minded investors?

Triodos Bank is a pioneer of social investment and raising finance for positive impact. Over the last five years it has raised more than £72 million for a range of social businesses and charities, from Dart Renewables, to River Cottage, to Golden Lane Housing, among many others.

It has just launched a guide for investors who may be considering the sector, and you can download the full copy here.

Of course, like any investment, there are risks. Social investments are not short-term and investors would typically see their money tied up for between five and 20 years. Indeed, you should be prepared for your money to be locked away for the time stated in the investment documentation.

Social investments also tend to be unlisted, which means they are not tradeable on recognised exchanges such as the FTSE or AIM. However, secondary markets do exist – the Social Stock Exchange for example, or investment platform Ethex. While these secondary markets are growing, social investments are illiquid, which means that selling shares or bonds before the end of the investment period can be difficult or even impossible, and fees will apply.

What sort of social investments are available now?

Organisations currently benefiting from social investment help tackle all sorts of problems, such as homelessness, mental illness and youth unemployment. Renewable energy projects also often seek investment.

Lisa Stanley from Good With Money points out 4 interesting offers available for investment now:

  1. Depository receipts in Oikocredit, which aims to create positive impact in the lives of disadvantaged people in the developing world through the provision of loans, investments and other support. Oikocredit has paid a 2 per cent gross dividend each year every year since 2000. The minimum investment is £150.
  2. Golden Lane Housing 2013 5 year bonds. Golden Lane Housing transforms the lives of people with a learning disability by providing them with a home. The original bond offer, launched in 2013, is closed, but you can buy the bonds via a matched bargain service offered by Ethex. The minimum investment is five bonds, currently around £100 per bond.
  3. A seven year debenture investment in Living Power – a portfolio of four operational power plants that generate energy in peak times from recycled domestic cooking oil. The debenture offers an 8 per cent return over the seven year life of the investment.
  4. Shares – represented by depository receipts – in Triodos Bank itself. The bank has delivered stable long-term returns, and maintained balanced growth in tough times. It has a 35 year, proven track record offering a compelling combination of social, environmental and financial returns. The depository receipts have delivered a return of 4.75 per cent annually. The minimum investment is Euro80 – currently about £65.

For more information on social investment, download the Triodos guide.

To read our other articles on the subject click the links below:

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