Have you heard of Social Impact Investing?

Until recently I knew very little about social impact investing and what was involved but since acting for a number of clients active in this area, I have become personally very interested in its objectives and the tremendous representation we have here in the United Kingdom.

For those of you, who like me until recently, knew very little about this subject, I will try and provide a brief explanation in simple terms:

Social impact investing seeks investments that strike a balance between private profitability and public value creation.  Many business owners in the past and I am sure a lot in the present, still believe that profit can be the only motive for business.  However, many are now asking what about the employees and the community?   Should companies consider maximising shareholder welfare not shareholder value?  Companies should care about the environment and social impact of their investment.  Many investors consider that profitability is generated in greater quantity by promoting the well-being of the community using the assets acquired.

One of the fundamental principles is to avoid making investments that are ethically unacceptable.

An example of how social impact investing works is where an investment is made with a private organisation into something that the Government has never been that good at, such as providing funds to organisations that assist with children in the care system. Whereas Government can find it difficult to organise good homes for children,  individuals who have the experience but need capital to scale up their specific programmes nationwide, can receive money in the form of investment by the Government to create a network of good home care.

Organisations such as Big Society Capital and the launch of both the Social Stock Exchange and Social Impact Bonds provide funds and impetus for this movement in investment.  I wasn’t aware of them until recently and maybe this is the same for you.  Hopefully, now you are aware you too can look into this new way of investing.

Posted by Nigel Whittle