Fairtrade banking: Social impact investing is going mainstream
Many people are familiar with fairtrade coffee, but less clear about where to go for the equivalent of “fairtrade banking”.
This is where a new suite of products called social impact investment comes in.
Social impact investment was originally a niche market. Options for people who wanted to be socially responsible in their investments were limited, and those products that were available were targeted at specialist investors – effectively closing the door on everyday people.
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But over the past decade, social impact investment has been brought into the mainstream. Global corporations are creating products to meet this demand, driven by a desire from consumers to make a difference, while still making wise financial choices.
There is potential for the sector to grow. We know that millennials especially want to invest in socially responsible businesses, such as those operating in renewable energy, social housing, and green bonds. And research shows that 45 per cent of people in the UK are interested in purchasing social impact investment products. However, only one in 10 currently do.
This indicates a general lack of awareness among investors about available investment options that make a strong social impact while also bringing a financial return. Barriers to the development and marketing of social impact investment products could also play a part.
So what are we in government doing to raise awareness, remove barriers, and encourage social investment?
Savings were paid into 11m adult ISA accounts last year. We want to ensure that these people know they can also make investment choices that reflect their values and have a positive impact on things they care about.
We want to widen the investment base to ordinary individuals and small investors, and we are working hand-in-hand with the sector to do that. Clear packaging will also be helpful for those investing our pension savings on our behalf, which could really lead to a step change in the social impact space.
The UK Sustainable Investment and Finance Association is already doing fantastic work in this area, raising awareness of sustainable, responsible and ethical finance, particularly through Good Money Week.
The government has also appointed Elizabeth Corley, vice chair of Allianz Global Investors, to chair an advisory group tasked with looking at how we can create a culture of social impact investment and savings in the UK. Senior representatives from 50 firms across the financial services industry have been seeing how they can make it easier for people to invest, and exploring what the industry can do to encourage greater social impact investment.
The first group of its kind in the UK, this is a perfect example of how we are harnessing the expertise of the sector to help drive change. Its recommendations on how to make further progress in the accessibility of social impact investment are due this autumn.
We are also providing clear support for mission-led businesses that seek to achieve positive social and financial results. A survey by Good Money Week found that 62 per cent of UK investors would like their money to make positive contributions to society and the environment.
We want to capitalise on this movement. And the government’s newly formed Inclusive Economy Partnership will do just that. It is led by 14 chief executives from a range of businesses and civil society organisations, including National Grid, Nationwide, O2, TechUK, National Council Voluntary Organisations and Big Lottery Fund.
This partnership will address issues relating to financial inclusion as well as tackling mental health and helping people to get into work.
Through our commitment to working with business, financial services, and the social sector, we are creating a culture of social impact investment to build an economy that works for everyone and help people make informed ethical choices with their money.
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