The UK National Advisory Board for Impact Investing (UKNAB) has highlighted £300 billion in potential investments that could be directed towards helping to solve social and environmental challenges.
In a new report: “The Rise of Impact: Five Steps Towards an Inclusive and Sustainable Economy”, the advisory board identifies five actions that could speed up the transition to a more purposeful economy.
Imagine a world where everyone could say ‘I know where my money goes and the positive impact it has – as a tax payer, saver, consumer’. A world where investing with impact is not at the expense of financial return.
Sacha Romanovitch, CEO, Grant Thornton
Recommendations include the creation of a £2 billion UK Inclusive Economy Catalyst Fund, which could jump-start investment and stimulate opportunities in communities that have suffered from decades of under-investment, tackling issues including social care, affordable housing and climate change.
The report highlights how institutional investors can seize on the investment prospects that will help achieve the UN Sustainable Development Goals (SDGs) in the UK, following the precedent of European financial institutions that are already leading the way. A coalition of the largest investors in the Netherlands – with a combined 2.8 trillion Euros in assets under management – has already agreed an action plan for investing in SDG themes. The report’s authors believe that the UK is in danger of falling behind.
Michele Giddens, Chair of UK NAB and co-founder and partner at Bridges Fund Management, said: “Impact investing has shown its value across multiple sectors and asset classes, achieving strong returns on investment while also financing new solutions to some of the UK’s most difficult social and environmental challenges. Over the last few years we have seen an explosion of interest globally, with more and more mainstream investors coming into the space. We are reaching the tipping point; we hope this report can help the sector move from the margins to the mainstream and, in the process, enable the UK to build a more inclusive and sustainable economy.
“The world is facing a funding gap of tens of trillions[1] in addressing sustainable development issues and recent political events have highlighted that large segments of the UK population feel left behind by economic growth. If investors, business leaders and policy makers all consider social and environmental impact alongside financial value then we can start to redress these issues. This is an incredible opportunity to evolve our traditional investment model and release billions of pounds to reduce inequality, protect our scarce resources and stimulate innovative new solutions.”
Other recommendations in the report include the creation of ‘Pensions with Purpose’ that will enable savers to invest in line with their values. UK NAB highlights the potential of harnessing the assets within Defined Contribution (DC) pension schemes, which are predicted to grow six-fold to $1.7 trillion over the next two decades. Three-quarters (77 per cent) of DC pension fund members have already said they would prefer a social investment fund compared to a conventional one; and 44 per cent said they would do so even if their final retirement pot ended up eight per cent smaller[2].
There is currently at least £150 billion[3] of capital currently committed to impactful investments in the UK, and interest in the area has been growing. Mainstream investors such as Barclays, Blackrock and Standard Chartered have recently joined Bridges Fund Management, UnLtd and other pioneers by launching products or platforms that explicitly seek both to achieve financial returns and drive social change.
Sacha Romanovitch, member of UK NAB Advisory Board and CEO of Grant Thornton UK LLP said: “Imagine a world where everyone could say ‘I know where my money goes and the positive impact it has – as a tax payer, saver, consumer’. A world where investing with impact is not at the expense of financial return. This report shows this is already emerging and provides a vision and a plan for putting purpose at the heart of our economy. When this happens, we’ll build markets people trust and in turn that will drive innovation. We’ll have environments that enable business and people to flourish. We’ll have dynamic organisations, growing sustainably. We’ll have a vibrant economy.”
UK NAB is the UK’s voice in a Global Steering Group of 15-member states plus the EU, chaired by Sir Ronald Cohen, which was established as the successor to the Social Impact Investment Taskforce set up during the UK presidency of the G8.
Chaired by Michele Giddens (co-founder of Bridges Funds Management), its members include David Blood (co-founder of Generation Investment), Saker Nusseibeh (CEO of Hermes Investment Management), Sacha Romanovitch (CEO of Grant Thornton), and Hazel Blears (former Labour MP).
Download a copy of the report here.
Want to know how to invest your own money for greater positive impact? Download the Good Investment Review for the latest star-ratings of impact funds available to UK investors.
[1] April 2017, Peter Thomson, President of UN General Assembly estimated a shortfall of US $90 trillion over 15 years to 2030; in July 2016 the World Economic Forum estimated a shortfall of $3.9 trillion per year
[2] DCIF (2013) ‘Identifying new ways to engage savers in Defined Contribution Pensions’
[3] UK National Advisory Board on Impact Investing: 2017 Impact Investing Guidance note
