Impact investment looks for social impact alongside financial returns.
In the UK, there has been a growing awareness of the need to broaden the funding available to social purpose organisations and build a social investment market with efforts being led over the last decade by the Social Investment Task Force and most recently the G8 International taskforce led by Sir Ronald Cohen.
An expanding number of investors are entering the impact investing arena. According to an Impact Economy report, there was over $9bn invested in impact investment globally in 2013. The UK market is growing and there are estimates that it will reach £1bn by 2015.
Impact investors believe that sustainability drives long-term returns and this requires consideration of social issues; many simply wish to see their investments making a positive difference to the world.
The impact investment market offers a choice of risk, reward and impact from each investment across the spectrum. Some investments seek to achieve market-rate risk-adjusted financial returns whilst others offer below-market risk-adjusted financial returns in return for the impact created – so-called ‘blended value’ investments. Each opportunity needs to be considered on its own merits and in particular the specific impact the enterprise seeks to achieve.
This is still a developing field. However, the launch of Big Society Capital in 2012 with £600m to invest, the 2014 legislation of a new social investment tax relief, and the Big Lottery Fund and Cabinet Office’s £60 millionOutcomes Funds for Social Impact Bonds represent a concerted effort by Government and others to facilitate social investment by and into charities and social enterprises. In a world of growing social issues and falling public spending, the need for social investment has never been greater.