Social investment ‘will be attractive to mainstream investors within five years’
David Ainsworth, Third Sector Online
A report by the Social Investment Business says there is sufficient momentum for social investments to attract commercial investors by then
Commercial investors will commonly be involved in social investment within five years, according to a report today by the Social Investment Business.
Making Good in Social Impact Investing, which examines the experiences of social entrepreneurs and social investors, says social investment is an emerging market and must learn the lessons of other emerging markets over the past 20 years. It uses the private equity, housing association and online sectors as examples.
"There is now already sufficient momentum that it should be a five-year project, not a 25-year one, to mature the social impact market to the point where it is unexceptional for mainstream investors to be engaged in it as an alternative investment market," the report says.
It suggests that existing social investments could be "securitised": some or all of their debts could sold to third parties, allowing existing investors to make their money back quickly and make new investments.
And it says there should be a trade forum to promote social investment, allow investors to communicate more easily and to share data.
Karl Richter, one of the report’s authors, told Third Sector that several changes were needed to help the market grow. "Our broader recommendation is that we would like to see more investment, and there’s scope for a broad array of financial instruments to help that," he said.
"At the client level, there’s a need for simple products. But at the investor level there’s a need for products that offer more liquidity.
"Securitisation is a controversial idea because of its role in the financial crisis, but you need to look at its advantages and make sure you don’t throw the baby out with the bathwater."
He said social enterprises needed closer collaboration and competition between investors, and the report recommended facilitating this through a forum.
"One of the most important things about an emerging market is the need for good data and measurement so you can see how your investments are performing," he said. "A forum can facilitate that. There’s also a strong requirement for investors to work together to manage their investments, particularly if several have invested in a single enterprise.
"It would also be very useful to promote the values and the principles of social investment to the wider world."