Impact investing is moving into the mainstream. The companies on the Social Stock Exchange – the UK’s main market for impact investing - have a total combined market value of £2bn and last year raised in excess of £400m.
We also saw the first LSE Main Market and Social Stock Exchange dual listing with Menhaden Capital plc raising £80m.
This reflects a wider change in investor profiles and attitudes – over 30 per cent of millenials now looking to invest their money, say the number one priority of a business should be improving society.
With affluent female investors that number grows even bigger, over 50 per cent of female investors say they’re keen to enter the social impact investment market. But what is impact investing and how do you get involved?
What to look out for?
Impact investors look at the same things as normal investors. They assess the company management team, the market, the business plan and its key financial data. But they go further. To pique the interest of an impact investor a company has to outline and quantify its social or environmental return, while many also talk about governance impact as well.
These things might seem intangible but today most companies can construct a framework so that you the investor can judge how much social good your money is supporting.
The most popular model to follow is the Environmental, Social and Governance (ESG) framework constructed by Big Society Capital, it’s the foundation for our impact research at All Street where we also assess a company’s economic impact as well. But there are others.
The UK government has also launched an open data initiative where a company’s benefit to society is quantified through a cost-benefit analysis and posted online for investors to review.
How do you get involved?
First, decide what your goals are. If you’re looking for a quick financial return then the impact market might not be for you.
But if you want to support an innovative company helping to change society, and if you can invest for the medium to long-term then impact investing is an excellent option.
Second, have a scan of the companies in the market and think about what sector you care about. Environmental impact companies qualify since they are driving amazing innovation in everything from more efficient and cost-effective solar power to environmentally friendly ways to stop metal corrosion.
But there is a significant range of options from clean tech, to health, housing, education and beyond. On behalf of the Social Stock Exchange we’ve produced research on all of their member companies. But there are other investment options as well.
The financial industry has taken a huge reputational hit since 2008 but the impact investing market has been quietly changing the way investors can engage with companies to drive positive change in society as well as profits. 2016 could be the year the market breaks out into the mainstream and there’s never been a better time to get involved.