Greater return, more liquidity and lower risk might attract City to socially invest, says new report

By: 

Cheryl Chapman

Managing Editor, Philanthropy UK

The social investment sector must introduce new investment mechanisms and improved standards if it wants to attract money from the City of London, according to a recent report.

Investor Perspectives on Social Enterprise Financing, written by the social enterprise consultancy ClearlySo, highlights the ‘global pools of capital’ which operate out of the City of London that could be invested alongside government and philanthropic funds in a bid to boost the social investment market.

But the 193-page report says several criteria have to be met before the sector can attract money from pension funds, socially responsible investment funds, wealth managers investing funds on behalf of clients and retail banks.

Such investors would need products that offer near-market returns, are easily traded or sold, and are relatively low risk, it says.

More robust measurement of social return, larger investment opportunities, and products and managers with a proven track record were also highlighted as issues that need to be resolved.

"When we matched specific preferences of different institutional investor types against available products, we found certain gaps where there were no suitable UK social investment products on offer," the report says.

Among the key recommendations to accelerate social investment made by the report include better support for intermediaries in building up the social investment market and the development of the market infrastructure.

The report was funded by the Big Lottery Fund, the City Bridge Trust, and the City of London Corporation. It was based on 55 interviews with institutional investors, including pension fund managers, banks, private equity firms, independent financial advisers and charitable foundations, as well as contributions from social finance experts from organisations including Deutsche Bank, Coutts, UKSIF and Venturesome.

Philanthropy UK’s latest magazine focuses on social investment for philanthropists – read more here.