What is Social Impact Investment?

With the growing awareness of the ‘toxic’ nature of many conventional financial investments, many people are choosing to investigate ‘Social Impact Investment’.

(c) thinkpanama - creative commons

By plugging their money directly into projects which are making a difference in society, investors are putting their money where their heart is.

But what is the chance of really making a difference through this kind of investment?

Gavin Francis, 44, founded Worthstone a Social Impact Investment company after becoming a Christian and re-evaluating a 25-year-long career spent in finance.

He explained how Social Impact Investment can provide a genuine alternative for those who want to do more than just put their money into the hands of a broker, and wait for their dividend.

He said: “My working experience has been in financial services, working for large companies, selling their products to financial advisors. I’ve done that for 25 years, I’d got to the point where I’d become a Christian and I was examining a lot of things in my life.

“I saw that the market was just a money go round, everyone was taking their cut, I really wasn’t convinced that this was all in anyone’s benefit except for the people climbing the corporate ladder.

“I got frustrated, I didn’t know what to do, until I came across the concept of Impact Investment.

“The thinking is that those who want to do good things with their capital will often put their money in to the stock market, which is probably having an overall negative effect, and causing problems in society. And then with the return they get from their investments, they give money to charities which work to try and solve those same problems.

“Impact investment on the other hand is money invested for a blended impact – financial return and positive impact upon society.

“Investors conventionally invest on the basis of two dimensions, risk and return. We’re saying that there is a third dimension – social impact. Most people don’t really know what their money is doing, what its being used for, they have basically abdicated responsibility for their wealth. But we find more and more people are genuinely interested in taking responsibility for their wealth, and wanting to make sure their investment is doing good.”

And Gavin is sure that this form of investment isn’t just good for the investor, it’s good for the whole of society.

“This should actually be a win-win for everyone, if you’re bringing in the marginalised, helping them to be productive rather than a drain on resources, then you’re going to have a positive impact on the whole economy. This kind of investment strategy should be of benefit to everyone.

“As an investor you may have a particular heart for something, social impact investment allows you to put your money into that. If you’re just looking for the best rate of return, you’re probably not going to go with this route to investment, but if you want to do more with your money than just ensure its not being invested in arms or oil, then it makes sense.

“Certainly the likes of Cadbury and Rowntree and other great philanthropists have been a great inspiration, but of course what we do isn’t philanthropy as such, it’s investment. But those Victorian Quakers with their vision of a better society have certainly been a great influence, particularly when we were thinking about how to build something like this.

“They did amazing things and if we can do similar things, well that would be something… The thing is government and charities can’t do everything, they don’t have the funds available, we have to accept that it’s not going to happen.

“What this does is it gives people the option to invest or if you prefer ‘lend’ their money rather than just give it away. Through that process they will grow closer to the project.”