Impact investing can be seen as the process of putting your money to work in such a way that it helps to achieve something positive for society. That can include a growing list of activities including access to education, energy, water or healthcare; affordable housing; renewable energy; and microfinance.
But there’s a growing appreciation that impact investing isn’t confined to those fields where the social benefit is obvious and direct. It’s also possible to have socially responsible investing in less obvious areas, but where the long term social impact can still be highly beneficial.
As such, impact investing can also be in businesses or projects which provide employment and training, or which disrupt an established sector for the benefit of society as a whole.
Something we specifically focus on with our investment opportunities at GrowthFunders, we’re proud to have been involved with a number of projects and companies that show exactly what impact investing can be today:
1. A residential property development project in Chilton
Recently, we secured £400,000 of funding for a pioneering development of quality family homes in Chilton, near Bishop Auckland in County Durham. The development, in partnership with leading national procurement organisation and social enterprise Fusion21, includes three CoreHaus homes, built using a modular core that allows homes to be built up to 50% quicker than traditional construction methods and with less construction waste.
The development will create around 50 jobs both directly and within the supply chain and will also provide apprenticeship opportunities. We are also extremely keen to support the local supply chain and will be going out to tender with local suppliers.
This project creates quality homes in an area where there is demand, improving the area and providing an asset for the local economy. On a national level it also directly addresses the chronic housing shortage, which is causing a range of social problems such as higher rents, which mean less disposable income, in turn having a seriously dampening effect on the economy, affecting everybody. Few investments make such a lasting impact as bricks and mortar.
Another successful GCV fundraising was for cloud-based software-as-a-service business Hive.HR. Hive helps organisations to improve financial performance, increase productivity, attract and retain talented employees, reduce sickness or absenteeism and improve customer satisfaction by improving employee engagement.
Aiming to raise £150,000, they attracted almost double that - £298,000. This has allowed Hive to grow significantly, working with blue chip brands to make their workplaces happier and more productive (and in July 2018, Hive returned to the platform for their next round of investment).
3. Intelligence Fusion
Technology business Intelligence Fusion (IF) is growing exponentially after successfully working with GCV to raise £487,000 to further develop its online global intelligence and risk management platform
IF provides an industry leading platform to help security professionals and global businesses manage risk and security issues by collecting, analysing and disseminating intelligence on a mass scale.
The County Durham-based company, which was set up in 2014, is using the funds it has raised to deepen its technology, utilising artificial intelligence to provide global intelligence at greater speed, breadth, depth and accuracy as part of its plans to become a global intelligence leader in five years.
Partnering with universities over the past few years to build up a network of more than 200 people who have helped to build up the company’s global intelligence picture through incident logging. These incidents are then processed, verified and analysed by experienced intelligence analysts who add the additional context businesses require to protect their people and assets more effectively.
4. AIM athleisure
Designing and producing high end fitness wear which is both stylish and functional, AIM athleisure is led by an experienced team who have identified a route to market for their ethically produced brand. We are currently working with AIM to raise £300,000 of seed funding to scale up the business, investing in personnel, production, and marketing.
An educated and informed modern consumer market is increasingly aware of ethical and environmental problems associated with the production of garments, particularly from Asia, and wants assurance that full account is taken of sustainability and social justice issues.
Ethical considerations are central to AIM’s business model. Its UK-based design and manufacture gives it direct control over labour conditions, minimises the distances to transport to market and as a result, the associated carbon footprint.
Targeting a trade sale in the region of five years after achieving an annual turnover of £9.2m and an EBITA of £2.3m, investors are targeting returns of 7x money-on-money.
At GCV, we are also currently working with BankNorth to raise £5m of initial seed capital in exchange for a 50% stake in the equity of the company. BankNorth is a start-up bank which aims to transform the way SME lending is delivered.
Its seven year target is to have 2,300 SME customers with a total loan book of £2.3bn. In terms of investor returns, the target money-on-money multiple for investors in this round is 20.63x.
Based in Leeds, the business is led by an experienced and ambitious team with an impressive track record in SME and retail banking. They are committed to building a business focused bank which combines market leading personal service, best in class delivery and exceptional speed of funding. By streamlining the lending process, it will seek to serve business customers in a way which cannot be matched by traditional banks.
Striving to have a transformative impact on businesses by employing thousands of people and boosting the economy, BankNorth will help to revolutionise and revitalise the entire SME banking sector.
Getting involved in impact investing
As these examples demonstrate, impact investing can cover a huge range of businesses and sectors. It’s no longer an investment option that covers just a small handful of organisation types, or within which only a minimal amount of opportunities exist.
Effectively open to anyone who wishes to get involved, as with any investments there are risks involved, but by taking the right approach and completing in-depth due diligence sufficient to your personal and portfolio requirements, becoming an impact investor is a very realistic possibility.