Social impact investing is on the rise. But what is it all about, and how can you get involved? Here, with the help of leading social impact investor Big Society Capital, we answer your 9 most frequently asked questions.
1. What is social impact investment?
Social impact investment means investing to address some of the most pressing social challenges such as providing affordable and accessible housing, healthcare, and education.
It goes much further than simply screening out companies that may have a negative impact on people and society. It’s about intentionally investing in companies and organisations that are actively helping to bring about positive social change.
Big Society Capital (BSC) uses the work of the Impact Management Project (IMP) to classify and measure its social impact. The IMP uses an “A,B,C” framework with A being lower social impact through to C, the highest. All BSC’s investments are expected to sit in C.
2. What are some of the key social problems that can be tackled through investment?
Across the UK, people face daily struggles to meet their basic needs. These include accessing adequate and affordable housing, financial products and services, healthcare, education, and being part of a safe and resilient community.
Social impact investment can make a huge difference to people’s lives by helping enterprises and charities tackle these issues at scale. The aim is to build a fairer, more equal society where everyone has the chance to thrive.
3. How big is the social impact investment market?
Social impact investing has risen fast over the last decade, growing almost eight-fold in the UK from 2011 to £6.4 billion in 2020, according to a report by Big Society Capital (BSC).
The biggest increase was seen during the Covid-19 pandemic, which exacerbated existing social problems and inequalities. The figures reveal a 26 per cent increase in the value of social impact investments from 2019 to 2020 (compared to a 21 per cent uplift from 2018 to 2019).
4. How can I invest for social good?
While the social impact investment market has grown massively in recent years, opportunities to invest for social good have unfortunately not been easily accessible to everyday investors.
To address this issue, BSC partnered with Schroders last year to launch the Schroder BSC Social Impact Trust. The £85 million trust provides ordinary investors with access to a portfolio of high social impact, private market investments. Other options to invest for social good include Ethex, Energise Africa, Triodos Crowdfunding, and The Big Exchange.
5. How is social impact measured?
It is notoriously difficult to measure social impact – it’s challenging to compare successes in solving homelessness with mental health, for example – but big strides are being made in this area.
Impact investments are often mapped against the Sustainable Development Goals (SDGS). These were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure peace and prosperity.
Investors in the Schroder BSC Social Impact Trust can see the social impact their money is making across the UK, and the specific SDGs being addressed, through a pioneering interactive map.
BSC also measures its investments using the IMP’s five impact dimensions; what, who, how much, contribution, and risk.
6. What are some examples of successful social impact investments?
Here are three examples of successful social impact investments:
- Often, viable and sustainable enterprises can struggle to access affordable finance. St John Ambulance Cymru provides ambulance and hospital transportation, as well as first aid training; alleviating the strain on the Welsh Ambulance Service. After its bank rejected a Coronavirus Business Interruption Loan Scheme (CBILS) application, the charity received a loan from the Resilience and Recovery Loan Fund. BSC helped to establish this £25 million fund, in a record four weeks.
- The pandemic has highlighted the need for better ways of addressing complex social issues such as unemployment, low educational attainment, reoffending and addiction. West London Zone works with local schools to find the children who might benefit the most from its two-year development programme. Children work with a Link Worker to set personal development goals to build their confidence, relationships, and academic achievement.
- There is a chronic shortage of housing in the UK, leading to rising levels of homelessness. Vulnerable people such as rough sleepers, people fleeing domestic abuse, and people with a disability, face a lack of suitable housing and the support they need. Hull Women’s Network (HWN) offers specialist domestic abuse support, nursery provision, and access to safe and affordable housing to vulnerable women and children across Hull. HWN received investment to buy 82 homes from Social and Sustainable Capital’s Social and Sustainable Housing Fund, and its Community Investment Fund.
7. Can my pension be used for social good?
Yes! Increasing numbers of organisations, including pension funds, university schemes and plenty of others are upweighting their allocations to impact investment and, as part of that, social impact. Pension trustees are increasingly looking to social impact investment to meet their growing ESG (environmental, social and governance) requirements as well as provide diversification from other asset classes.
And, as we continue aiming to ‘build back better’, social impact investment is likely to play an increasingly important role in helping communities find a way out of the pandemic while tackling some of society’s most pressing problems and providing a sound return for investors.
8. Is it possible to achieve both social and financial returns?
Many investors still believe that investing to make a positive social impact means sacrificing financial returns. However, the opposite can be true.
Evidence such as the Good Investment Review shows that sustainable, well-run companies are likely to perform better than the market average over the long term.
9. What does the future look like for social impact investment?
Investors are increasingly looking to be socially responsible with their investments. BSC believes that the growth of social impact investment will provide more opportunities for enterprises and charities to scale up their impact while also bringing investors a sustainable financial return.
It has set the goal of at least doubling the UK social investment market, to between £10 billion and £15 billion, by 2025.
This article is in association with Big Society Capital.
