Several investment giants have partnered with The Big Issue charity to create a new platform specifically offering impact funds to retail investors.
Asset managers Standard Life Aberdeen, Columbia Threadneedle and AllianceBernstein and other investors, including fintech firm FNZ, have put in almost £1m to fund the venture.
The blockchain-powered platform, called the The Big Exchange, which will offer 30 to 40 social and environmental impact funds, is expected to launch by next summer.
The Big Issue says it expects to attract around £3bn of assets within five years. The funds on the platform will include Alliance Bernstein’s Sustainable Global Thematic fund and Standard Life Aberdeen’s UK Equity Impact – Employment Opportunities fund. The minimum investment for the funds is set to be £500.
On the face of it, the reaction to this could well be – so what? After all, for the impact investment sector globally, £3bn is a drop in the ocean.
In fact, leading investment bank JP Morgan forecasts that the impact investment market will be worth some US$1trn in about two and a half years. This forecast was no outlier. It is supported by research by the EIRIS foundation, which revealed investment in UK green and ethical retail funds totalled around £8.9bn in 2007, and 10 years later in October 2017 this figure had nearly doubled to an estimated figure of just over £16bn.
This is further supported by research by ethical bank Triodos, which also shows that the UK's socially responsible investing (SRI) market now accounts for £16bn in assets under management.
However, every little helps and, in UK terms, £3bn isn’t that little.
But, to concentrate on the financial numbers runs the risk of missing the bigger picture.
The real significance of The Big Issue move is that it is likely to bring impact investing to a far wider audience than it has commanded until now.
As a form of investment and force for social good, impact investing has already gone a long way towards winning over the global elites and international financial organisations.
No less a body than the United Nations, through its Social Impact Fund, is about to launch its own US$200m fund which will invest in food and agriculture, cities and urban areas, energy and materials and health and well-being around the world.
David Galipeau, the founder and chief of the UN Social Impact Fund, in an address to the Impact Investing World Forum 2017, argued that impact investing will be driven by a new generation of extremely powerful investors. He said:
“There’s a huge transition of family offices, moving from patriarch led family offices to matriarch led family offices which have a different value system. There’s a huge shift from legacy wealth in the West to newly created wealth in the East, where a lot of western wealth has been around for hundreds of years and has a lot of history and a lot of habits whereas the new wealth doesn’t. In the East investors are open to new ideas and they are very concerned about how they will become responsible investors.’’
“Impact investing is about to go mainstream.’’
But, the urge to do good and to make a difference through the power of one’s investments is not limited to the wealthy philanthropist or chief executive of some banking giant
Research by Triodos Bank has revealed that a majority of investors in the UK favour a fairer and more sustainable society. However, two-thirds of them have never been offered ethical funds, despite the fact that 64% of investors would like to support companies that make a positive contribution to society and the environment.
This desire for a fairer and more sustainable society doesn’t necessarily point to some kind of socialist resurgence.
Triodos’ research also revealed that most investors believe businesses and not governments have the ability to address many of the biggest challenges facing the world. Nearly three-quarters said companies can create positive social and environmental change, whilst half believe the state seems powerless to change society for the better.
There’s also another powerful force driving a bottom up interest in impact investing - millennials.
Younger people always tend to be more idealistic, wanting to make a difference and change the world for the better. The difference now, for the so-called millennials, is that they feel empowered to be able to realise some of their ideals
On the one hand, the internet and advances in digital technology, particularly online platforms, have brought wider investment opportunities and greater control over their own investment decisions at the same time as it has done away with much of the mystique surrounding investments and the barriers placed in the way of the uninitiated. It has also given them an immensely powerful research tool, allowing them to inform themselves on social issues and to explore which businesses are truly doing something to address them.
In addition, they also have some very powerful role models in the shape of other millennials who’ve embraced capitalism and made themselves into millionaires - or even billionaires - but apparently without compromising their ideals. Many of these are household names, internationally recognised entrepreneurs who used and directed the new technologies to build huge businesses and to change the world. But there are also hundreds of less famous young entrepreneurs who, nonetheless, are well-known in their own countries and regions.
It is also significant that someone of an older generation, but very much an exemplar of new technology, is Bill Gates, the Microsoft billionaire. He and his wife Melinda have set up a US$51bn foundation to help tackle global health inequalities, fight disease, improve healthcare, stimulate inclusive and sustainable economic growth and improve education.
All of this is helping to spread the impact investing message to a much wider audience. The super wealthy, the global bankers and the governments have been won over and now the popularity of impact investing is spreading through different economic and social groups and across generations.
This means that The Big Issue’s move, while it will certainly make a difference in itself, will also have an impact way beyond the £3bn - and a brand such as The Big Issue will add decisively to the impetus that is already building behind impact investing.