Social or “impact” investing is growing. Once a niche, this sector is now large and diverse: from microfinance – estimated to be worth approximately $8.2 billion in 2009 (1), to low-carbon finance – which HSBC predicts will reach $2.2 trillion by 2020. The opportunity for making money from a product or service that delivers social, as well as financial value, is growing every day. Could impact investment become the norm rather than a niche?
There is still a long way to go but social investment is gaining interest from investors and social entrepreneurs not just because of the social and environmental benefits it delivers, but for the business opportunities it creates. The UK Government concurs. It set up the Social Investment Taskforce in 2000; its final report in 2010 highlighted the strong progress that was made during that initial 10-year period.
It is vital that we see similar results over the next decade – and there are signs that we will. A recent government report, ‘Growing the Social Investment Market: A vision and strategy, outlined what is required to continue growing the market. It recognises the need for regulation to support community investment and we now have The Localism Act, which provides greater powers for communities to take charge of local services. It supports recommendations from the original taskforce for an independent bank to provide financing for social enterprise. As a result, Big Society Capital launched with £600 million to invest in April 2012.
But there is one area that still requires work. The report highlights the need to make it easier for people to direct their savings and pensions into social investment opportunities. “We are keen to see an increase in products that enable investors – whether it’s high street customers or major pension funds – the opportunity to get involved in financing social enterprise,” said Penny Shepherd, UKSIF Chief Executive. “I think we will see a huge development in this area over the next ten years.”
This article was featured in the April 2012 edition of our e-bulletin Counter Intelligence. To subscribe, please click here.
1 THE IMPACT INVESTOR’S HANDBOOK, Lessons from the World of Microfinance, CAF Venturesome: Market Insight Series February 2011, First Edition