Creating a culture of social impact investing
by Elizabeth Corley, Vice Chair, Allianz Global Investors
Recent evidence suggests that in the UK, around 56% of people are interested in purchasing social impact investment products1. These are products that invest in companies and enterprises that not only measure and report their wider impact on society, but also hold themselves accountable for delivering and increasing positive impact. However, only 9% have actually invested in the sector, showing a huge gap between their expressed interest and actions taken. Having a choice to invest with impact through personal savings and investments helps address issues that have previously been confined to the philanthropic domain and could play a role in overcoming challenges such as inequality, deprivation and the environment, whilst still offering a financial return2.
A number of factors are contributing to the gap between intention and action including a lack of investable products (often because it is difficult to identify and crystallise social impact investments), difficulty in reporting social impact intentions and outcomes, as well as investor inertia in acting on their interest.
These challenges are not insurmountable. There are five key action areas3 centred on practical, achievable recommendations, which will help the financial services industry and other stakeholders deliver a choice of quality social impact investment products to individuals and create a culture of social impact investing.
- Improve deal flow and the ability to invest in scale – A natural starting point is to expand the social impact investment market by ensuring that there are enough opportunities in which to invest.
- Strengthen competence and confidence within the financial services industry – This will be a key step in ensuring investors and practitioners, including financial advisors, better understand how financial and social factors can be integrated more easily.
- Develop better reporting of non-financial outcomes – The financial services industry and businesses should develop consistent non-financial reporting methods, potentially using the UN’s Sustainable Development Goals as a context.
- Make it easier for people to invest – Some of the obstacles to the growth of the social impact investing market appear to be structural and behavioural, therefore building awareness around social impact investing through communication and educational materials as well as agreed standards and labels will play a key role.
- Maintain momentum and build cohesion across initiatives – Embracing the opportunities and committing to take forward these recommendations is a necessary action for all stakeholders.
The financial services industry, through quality product design, investment advice and service, will play a central role in making a real difference and creating a culture of social impact. This will not only generate opportunities for individual savers and investors and enable the financial services industry to better engage with its clients, but will also have an important wider benefit for society as a whole.
- The Value of Being Human: A Behavioural Framework from Impact Investing and Philanthropy, Barclays, 2015.
- Financial Times, Investing for Global Impact, 2017
- In 2017, an Advisory Group, formed at the request of the UK Government and made up of senior representatives from the financial services industry and social sectors, began work on answering an important question: “How can the providers of savings, pensions and investments engage with individuals to enable them to support more easily the things they care about through their savings and investment choices?” The final report and its full recommendations can be found here.