Thursday 6th October 2011
UK at watershed moment for social impact investing with potential to be global leader
Social impact investment has the potential to evolve from being an emerging market to a very large, mature investment market attracting mainstream investors, according to a report published today. Making Good in Social Impact Investment: Opportunities in an Emerging Asset Class argues that the UK is well placed to be a global leader in the field, as social impact investment builds on our record as home to a well-developed, not-for-profit, charitable and voluntary sector and our historic strengths in financial services.
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(Podcast: An interview with Rupert Evenett and Karl H Richter by The Social Investment Business)
In the report, commissioned by The Social Investment Business, sponsored by TheCityUK and with a foreword by Cabinet Office Minister Oliver Letwin, authors Dr Rupert Evenett and Karl H. Richter explain the need for an integrated social impact investment market with a range of financial products suitable for the different stages of social sector organisations’ development. They conclude that social impact investment has all the characteristics of a distinctive asset class – best understood as an intermediate capital market with features of both debt and equity – which, from an investor’s perspective, can offer sustainable financial return, assessable risk and the potential for diversification.
“The social sector is currently severely undercapitalised. Social entrepreneurs and charity leaders want to be treated like other small businesses with access to a range of capital suppliers and funding types, releasing them from the “hamster wheel” of continual one-off grant funding. In fact, investment readiness among civil society organisations is over stated as a barrier, it’s as much a case of investor readiness – it’s the investors that need to get up to speed on the potential opportunities.”
Co-author Karl H. Richter added:
“The point about markets is that you need to create them, and our analysis is that in the UK we are potentially at a watershed moment. There is now sufficient evidence from the track record of existing social investors for the market to make the step change in scale necessary to become a fully functioning, mature, investment market. Growth, collaboration and partnership in this market is good not only for investors and social sector organisations – but also for the vulnerable people who rely on them for help and support.”
Chris Cummings, Chief Executive of TheCityUK says:
“Social impact investing is a targeted, positive way to channel financial capital and create mutually beneficial investor and social sector relationships. It is a maturing asset class in the world of international finance and there is now an opportunity for the UK to become a recognised global leader by developing and sustaining the solutions called for in this review.
“At a time when the role of the social sector in stimulating economic growth is receiving more attention, TheCityUK is pleased to be contributing to the understanding of its potential and the conditions for success.
“The benefits to consumers, businesses and government from financial and professional services derive, in part, from the UK’s leading position in many financial markets. Many of these markets – together with the jobs, income and tax they generate – are based on the UK being the location of choice.”
The report is clear that the social impact investment market needs to be built around the needs of its customers – social sector organisations – and that their voices are heard loud and clear. The authors solicited the views of experts within organisations that both provide and seek social investment; the ‘bottom up’ views of leaders of social sector organisations, contributions from senior figures at commercial investors, such as Royal Bank of Scotland, Co-operative Bank and Deutsche Bank, and from social investors such as CAF Venturesome, Esmée Fairburn and Big Issue Invest.
Notes to editors
1. Making Good in Social Impact Investment: Opportunities in an Emerging Asset Class by Dr Rupert Evenett and Karl H. Richter will be available to download free from 6th October 2011 at http://www.thesocialinvestmentbusiness.org/sir
2. For further information or interviews, please contact
The Social Investment Business press office:
Liz Banks – 0207 842 7726/ 07809 504072 email@example.com
Nicola Jones – 0207 842 7755 firstname.lastname@example.org
Caroline Parker/Harry Stein (FTI Consulting)- Tel: 020 7269 7252/7141
3. The Social Investment Business, the largest social investor in the UK, exists to help social enterprises, charities and community organisations do more of what they do best – supporting people and communities most in need. We help organisations prosper by providing innovative financial solutions, business support and long term strategic thinking.
4. About TheCityUK
TheCityUK is the independent body promoting UK-based financial and related professional services. It was created with the support and initial financial backing of the City of London Corporation.
On 1 June 2010, a predecessor organisation International Financial Services London (IFSL) was integrated into TheCityUK and IFSL members and staff transferred to TheCityUK.
TheCityUK’s strategic priorities are guided by an Advisory Council of financial services leaders spanning all sectors of the industry throughout the UK. The Advisory Council is chaired by Sir Win Bischoff of Lloyds Banking Group.
The Board of Directors, chaired by Stuart Popham, Senior Partner at Clifford Chance is responsible for developing strategy and overseeing delivery, including the remits and activity of the organisation’s advisory groups and committees.
TheCityUK is the cross-sector voice for the UK financial services industry, working to build a deeper pool of support across the UK, promoting UK financial services overseas and contributing to the regulatory and trade policy debate.
Our purpose is partnering prosperity – supporting the competitiveness of UK financial services and protecting their considerable economic contribution. TheCityUK co-ordinates and facilitates the contribution of its members to drive and deliver its priorities.
Its UK-wide membership covers all sectors in financial services and related professional services. It is independent and politically neutral.
For further information please see www.thecityuk.com