Defining social within impact

Like many others, I often use anniversaries as an opportunity to celebrate, reflect and recalibrate. I will soon be entering my fourth year at Big Society Capital so it seemed timely to think back to how my work has changed and developed during this period. One area I would like to focus on is the growth of impact investment.


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My role within Big Society Capital is to engage with financial institutions and investors who might become or already are social investors. When I joined, it was unusual that any of the asset owners or investment advisers that I met had heard of social investment or investing with a dual purpose; to deliver measurable social outcomes and get a financial return.

It’s heartening to see that in less than 5 years, the idea of investing for impact is no longer alien. In fact, some of the largest investment firms in both listed and private markets have either launched impact funds or are planning to. More intentional capital is looking to invest in enterprises that also care about impact. Much of this is positive progress, with mainstream investment firms raising the profile of impact investing amongst a greater number of investors who have never heard of impact and attracting investors beyond those who are “innovators” and “early adopters”.  There is of course scepticism, many expressed by early impact investors concerned about the re-labelling of Environmental Social Governance (ESG), ethical or sustainable funds as impact funds or even more seriously, the claim that some funds are “impact-washing” to attract new investors.

Personally, I think the growth of ESG is a positive development for impact investing because investors who are used to purely profit maximising from their investments are unlikely to allocate capital into impact without the journey of thinking about using ESG to mitigate risk, how their investments affect different stakeholders, to whether they want to play a role in investing to tackle a particular problem.

How does all this affect our work? In particular, the investments we have made into intermediaries who then invest in social enterprises and charities that tackle social issues in the UK. As someone whose day to day job is to engage with investors and explain what social investment is, I think it is hugely important for us, and our intermediaries to define what makes social investment unique within the impact investment universe because of course, social investing is a subset of impact investment.

A small group of us have embarked on a project to re-vision and re-position social investment and we believe what might differentiate social from impact is:

  • Intention to deliver high or deep impact, not only scalable investments
  • Willingness to consider really tough and entrenched social issues
  • A long-term commitment to impact
  • Willingness to invest where there is persistent market failure or to a desire to break market failure if possible
  • “Investing for impact” rather than “investing with impact”

One of the most hotly debated topics in any impact investing conference is always around financial returns. Can you get risk-adjusted returns and impact? Do you have to trade off financial return or something else (duration/liquidity) for impact? These are important and extremely valid questions for any investors but what you don’t often hear is what kind of impact is investors hoping to achieve? What problem might they want to solve? Who do they want their investment to impact? As impact investors, surely the type of impact is as pertinent as the financial returns we are trying to achieve. Positioning social within impact might help us focus more on the impact side of the equation.