The UK Sustainable Investment and Finance Association (UKSIF) has released the latest in its series of ‘The Future of Investment’ reports containing an examination of developments and future prospects in impact investing based on interviews with a number of experts.
The interviewees for the report are Nick O’Donohoe, CEO, Big Society Capital, Michele Giddens, Partner and Co-Founder, Bridges Ventures, Rodney Schwartz, CEO, ClearlySo, Geoff Burnand, Chief Executive, Investing for Good, David Hutchison, Chief Executive, Social Finance, James Vaccaro, Head – Market & Corporate Development, Triodos Bank, and Gavin Francis, Founder and Director, Worthstone.
Big Society’s O’Donohoe says the group sees principal growth areas for impact investment in the UK include so-called payment-by-results (PbR) sectors in social provision (e.g. prisoner rehabilitation bonds) where there is likely to be greater demand for working capital. Health and social care, he says, is another area where there is a policy push towards innovative ways of providing community care and where social sector organisations (SSOs) can bring in new capital. Third, he says, current government policy drivers means communities are taking over local assets, meaning they will need capital to develop, own and manage them.
O’Donohoe says each of these areas will be attractive to impact investors if they broadly meet two criteria: the potential for achieving and evidencing social impact and a robust business model.Vaccaro at Triodos says it is seeing growth in sectors including renewable energy (loans and equity), sustainable agriculture (loans in Europe, equity for emerging markets), long-term private equity for sustainable trading companies (e.g. organic, fair-trade, natural products), where Triodos is raising a new fund.
Other areas of growth, he says, include sustainable financial services in emerging markets (loans and equity), social housing (loans and bonds), health and social care (mostly loans), social impact bonds (mostly equity), and arts, cultural, sport/fitness and education projects (loans and bonds).
In terms of the regulatory prospects for impact investing internationally, Giddens at Bridges Ventures, notes that South African policymakers have looked at the challenges of using institutional capital to improve society in the Revised Regulation 28 of the Pension Fund Act.
She said the US Community Reinvestment Act (CRA) had also helped to encourage institutional investors in the States to direct more capital towards social and environmental investments.
Triodos’ Vaccaro notes that having special ring-fenced vehicles, at scale, with tax advantages to support impact investments can be very effective for governments seeking to develop impact investing. To this end, he notes that the Dutch Green Funds regime, which was extended to culture and overseas development investments, was effective at mobilising retail investment into impact investments and brought in over €15bn into green projects. Link
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