Failing to invest in social good

National Director of Oikocredit UK, Monica Middleton, warns that UK investors are lagging behind Europe in social impact investments. The recent Autumn Statement placed ethical and sustainable finance back on the political agenda. With the Government announcing an extension to Social Investment tax relief, there is clearly a nation-wide drive not just to raise awareness of social impact financial products but also to encourage active socially responsible investment. We are urging UK investors to make 2015 the year that they invest more of their money for social good. With a minimum £150 Oikocredit investment, UK consumers can secure both a competitive financial return and support entrepreneurs, small businesses, farmers’ co-operatives, and other enterprises in developing countries to access much-needed capital Yet our latest research, conducted by Tooley Street Research, shows that UK investors are significantly lagging behind their European neighbours, with those at the top of the league table investing almost 24 times more than UK investors in social impact products. Social impact investments taken out by individuals and institutions are made with the intention not only of yielding a financial return but also of obtaining a wider public policy or social impact, for example alleviating poverty. There are increasing numbers of impact investment financial products available on the market including shares, depository receipts, bonds or pension funds, and the results of these investments are actively measured both for their social outcomes and their financial performance. Typically, social impact investments might be used to finance fair trade organisations, social enterprises, or microfinance institutions, with the intention of helping small businesses and communities in developing countries to become economically self-sufficient. They can also be used in the domestic market, for example, as a social impact bond which invests in a UK prison and delivers a financial return if re-offending targets are met. The total European impact investment market is worth around €20bn and is growing rapidly, but is monopolised by high net worth individuals, charitable foundations, pension funds and insurers. Only 3.4% of socially responsible investment comes from individual retail investors, despite recent research - cited by the Cabinet Office - suggesting that the UK has a growing appetite in this area. Our findings are in marked contrast to the rise in other sustainable lifestyle choices made in the UK. Brits have been quick to adopt ethical retail choices such as buying fair trade food and clothing. The UK represents the world’s largest fair trade market, with over £1.7bn of fair trade products bought every year. However, ethical and sustainable financial choices appear to fall far behind, often due to the lack of understanding and readily available information. This research shows that UK investors are trailing well behind our European counterparts, and in fact have very low awareness and understanding of socially responsible impact investments as an alternative to other financial products or overseas donations. This is in stark contrast with our heritage for charitable giving, and the recent boom in other sustainable lifestyle choices made by UK consumers, such as fairly traded goods.