Insights

What is impact investing?

Impact investing is a form of socially-responsible investing which aims to produce measurable, positive outcomes for people, communities, and the environment, as well as providing a return on investment for those who invest.

In a place where philanthropy meets private equity and a new type of investor is born; one who wants to make a difference, whilst also making money from their investment decisions.

Although the following comes from an Australian article, it also reads true for the majority of countries: “Governments and philanthropy alone can’t address the challenges that [we] face." The idea is that impact investing will act as a catalyst for making a substantial impact on the social and environmental problems we (as a community, nation, or world) currently have. 

Here's a quick video which offers a fantastic overview of impact investing:

In this post, we'll be answering some of the questions you may have about impact investing, including:

  • How different is social impact investing to start up angel investing?
  • What investment opportunities are available?
  • What is the investment used for?
  • How can the level of "impact" be measured?
  • When can investors begin to see a return?
  • Are there any available tax breaks?

If there's anything you feel we've missed out, please leave a comment below and we'll look at answering any further queries you have.

  • How different is social impact investing to start up angel investing?
    In a lot of way, not that different. For example. according to research carried out by Companies House, 2014 saw the launch and registration of a record number of startups in the UK (571,173). The number was up from 526, 446 in 2013 and 484, 224 in 2012 and added fuel to the suggestion that entrepreneurships and start up investing had been helped to kick-start the UK's struggling economyThe idea is that social impact investing will add to this growth, not only in the UK, but around the world. 

    Also, co-investment can work for impact investing just as it does in angel investing. In fact, collaboration between private investors and government funding is crucial to attracting added finance options and increasing the speed at which change in the world can happen.

  • What investment opportunities are available?
    Increasingly, social impact opportunities are appearing on online platforms as previously-charitable ventures evolve into start up, early stage, and more established businesses and look to raise capital from a range of investors, rather than solely from philanthropists and the government.

  • What is the investment used for?
    Predominantly, the capital goes towards developing new products and creating an environment where sustainable social businesses can begin to thrive. Funding is being used to take impact investing from being an emerging to a large and mature market which starts to attract mainstream investors.

  • How can the level of "impact" be measured?
    This is an interesting question; in non-financial terms, measurement can be difficult. Individual businesses can set their own targets and key indicators - relevant to the work they will be providing/are already providing - which will help measure the level of impact.

  • When can investors begin to see a return?
    As with angel investing, this is dependent on the business' sector, success, and exit strategy. It is never written in stone and is different company to company. Typically, exit strategies don't usually exist in not-for-profit social enterprises, but the introduction of private investments mean that different types of businesses are becoming involved in this market.

  • Are there any available tax breaks?
    Just as angel investing offers EIS and SEIS reliefs to investors, social impact investing offers Social Investment Tax Relief (SITR), which was introduced to support and encourage investment into charities and social enterprises. If the opportunity is eligible, investors can receive 30% income tax relief. More information on SITR can be found here.

 

 

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Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.