Social Impact Investing with Big Society Capital – What Investment

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While ESG may grab all the headlines, social impact investing provides the opportunity to use your capital to make real improvements to people’s lives.

Investors have always wanted to see a financial return – but it is increasingly possible to be go beyond this and achieve a positive impact on society at the same time. There is now more demand for investment funds with impact, and more opportunities for investors to put money to work to good effect.
Recent research by the Investment Association shows 66% year-on-year growth in responsible investment – with more than half of 2020’s inflows into European funds seeking some sort of responsible mandate.
Responsible investing comes in many guises. The best known is ESG – assessing how companies manage environmental, social and governance risks, and investing accordingly.
Done well, ESG can be effective and can encourage better outcomes for people and planet, as well as mitigating some financial risks, for example, from future regulation to tackle climate change. However, as Friends Provident Foundation’s 2020 State of the Sector report found, the quality of ESG funds varies greatly, with marketing claims not always aligned with investment practice.
Impact investing takes the desire to have a positive impact a step further. Investors look for opportunities to make a deliberate, clear and ideally measurable positive impact with their money.
Big Society Capital is the UK’s leading social impact investor, looking for organisations with a social mission that can create both a sustainable financial return and real improvements to people’s lives. With co- investors alongside us, we have helped make more than £2bn available to over 1,200 social mission organisations.
This market is now significant and growing fast, with social impact investing in the UK increasing six-fold in the past eight years. The market covers a wide range of asset classes, including social property funds, which made up 42% of this market at the end of 2019 and continue to grow rapidly.
These funds invest directly into UK residential property to provide homes for individuals who are not served by the mainstream home ownership or rental markets, including those who have experienced homelessness or are living with a disability. Social property funds provide ‘equity-like’ finance to acquire or develop property through lease-based structures, and offer a clear and tangible positive social impact.
For example, Hull Women’s Network, which provides shelter for women fleeing domestic abuse, has as a result of investment from social property funds provided 200 additional safe homes.
Another asset class, the charity bond market, has grown 60-fold since 2012. Charity bonds have many similarities to traditional bonds but can only be utilised by charities, who use the proceeds to accelerate their social impact.
They have provided capital for organisations including Golden Lane Housing, the housing arm of disabilities charity Mencap, which used a charity bond to provide homes for people with learning disabilities.
We are also seeing growth in social venture investing. This takes the tools and techniques of traditional tech-driven venture capital investing and applies them to tackling social issues such as mental health or access to education. In 2020, we saw 10 times as many funds looking to invest in this field than in 2018.
One example of this in action is the Fair By Design Fund, which invests in start-ups that address the fact that people in poverty often pay more for basic services. For example Wagestream aims to provide a fair and ethical finance alternative to payday lenders.
In addition to creating social impact, these kinds of investments can provide an important part of an overall investment portfolio.
They often rely on different sources of value from many mainstream investments, meaning they provide diversification and will not necessarily move in line with other investment markets. Many have inflation-proof income streams, such as social property funds that ultimately rely on government-backed local housing allowance.
With growing social needs, especially in the light of Covid-19, the demand for these kinds of services is increasing.
We know, however, that accessing social impact investment has historically not been easy. That is why we recently partnered with global asset and wealth manager Schroders, to launch the Schroder BSC Social Impact Trust.
The trust aims to provide investors with high-impact holdings that contribute to solutions to social challenges, alongside targeting long-term capital growth and income. We believe this is the first time such a product has been made available on a stock exchange, enabling ordinary investors to see their money have a positive impact on local communities.
I recently chaired a webinar looking at trends and future opportunities in ESG and more intentional social impact investing. It confirmed to me that this is the direction in which the market is heading and that the potential is huge.
More than 350 people signed up and stayed through a long and detailed discussion, at the end of which they posed a range of questions. I could see the opportunity for connecting that interest and those potential sources of investment with the organisations helping to provide secure housing, high-quality care and better employment for those who need it most.
What Investment is the premier magazine in the UK for private investors, exploring opportunities across the market, seeking out the best funds, shares and ideas. We also look at the latest trends in wealth management and tax planning to give our readers a unique perspective in a fast moving world.  
What Investment is the premier magazine in the UK for private investors, exploring opportunities across the market, seeking out the best funds, shares and ideas. We also look at the latest trends in wealth management and tax planning to give our readers a unique perspective in a fast moving world. Get access to the digital pdf and have the physical magazine delivered to your door.
What Investment is committed to exploring the best opportunities in the investment trust market. Investment Trusts are covered in every edition of the magazine, and in alternate months we delve into the best opportunities in our special investment trust section. Readers who have been with What Investment since its launch over thirty years ago regularly tell us that their subscription is one of the best investments they have ever made.
What Investment is committed to exploring the best opportunities in the investment trust market. Investment Trusts are covered in every edition of the magazine, and in alternate months we delve into the best opportunities in our special investment trust section. Readers who have been with What Investment since its launch over thirty years ago regularly tell us that their subscription is one of the best investments they have ever made.
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© 2021 Bonhill Group plc
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