Notably, however, the number of funds going down the social impact route remain small and where they are, the sums being invested are still small. Waltham Forest was among five investors contributing a combined total of £10m to Impact Ventures UK and the five funds in the Investing- 4Growth initiative have collectively committed £250m.
FINANCIAL MATERIALITY
A critical barrier to large-scale social investment remains the perception of having to give something up in order to give something back. The difficulty measuring nonfinancial factors, such as improved nutrition or lower re-offending rates, and the lack of global standards in this regard are a significant challenge to the industry.
As Chinnery says: “For the social impact investment market to really expand, it will have to be seen as having your cake and eating it. That is not necessarily wrong. The investors’ goal may be to have their cake and eat it, and still have a sense of creating benefit beyond just making money.”
Financial materiality remains a critical issue, especially for corporate pension schemes who may not have as clear a cultural mandate towards social factors as their local authority compatriots.
In a landmark study of 100 local authority pension funds in September 2012, the Smith Institute showed pension trustees aim to receive at least equally beneficial financial returns. Of the 100 local authority pension funds they studied, none would be prepared to accept lower returns in exchange for achieving social benefit; they saw “finance first” as their overriding duty.
Jane Goodland, senior investment consultant at Towers Watson says: “Very few pension investors have gone down the impact investment route. Probably because they see it as unconventional and not compatible with their investment objectives.”
At the margins, the pension promise is beginning to morph towards ensuring the financial sums paid out to investors can provide a decent quality of life for those retiring into tomorrow’s society and economy. However, while the legal definition of fiduciary responsibility focuses on financial return, many will find themselves between a rock and a hard place until social impact investment can demonstrate giving back doesn’t mean giving up.
Comments