UK lagging behind Europe on social impact investing

Despite government incentives and research suggesting appetite for social impact investing, the UK is lagging behind European counterparts in the area, according to a survey.

In an article published on Politics Home, Monica Middleton, national director of Oikocredit UK, explains that it is a lack of understanding and readily available information that is holding back the UK, rather than an appetite for ethical and sustainable financial choices.

In 2014’s autumn statement it was announced that charities would be able to borrow up to £5 million a year under the social investment tax relief. The tax relief was announced during the 2014 budget in a bid to incentivise investment in enterprises that deliver social good, the move was expected to unlock up to half a billion pounds in finance for charities and social enterprises over a five year period.

Middleton explains, “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 and pension funds, and the results of these investments are actively measured both for their social outcomes and their financial performance.”

According to Oikocredit, the total European impact investment market is worth around €20 billion (£15.7bn) and is growing rapidly. However, it is monopolised by high net worth individuals, charitable foundations, pension funds and insurers, with just 3.4% of socially responsible investment coming from individual retail investors.

The UK was found to be trailing behind the top European social investors, with some European countries investing almost 24 times more than UK investors in social impact products. This was linked to a lack of understanding and readily available information, rather than lack of appetite, as there has been a rise in other sustainable lifestyle choices made in the UK.

Middleton added, “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 out heritage for charitable giving, and the recent boom in other sustainable lifestyle choices made by UK consumers, such as fairly traded goods.”

Photo: 401(K) 2012 via Flickr 

Further reading:

Concerns raised over social investment tax relief

Social investment risks being ‘stifled’ by regulation

Bringing social investment into the mainstream

Budget 2014: Investment tax relief to boost social enterprises

Impact investment ‘developing rapidly’, says UKSIF report