October was a good month for conferences. The Global Impact Investors Network came to London – 350 people from 35 countries. The potential of releasing flows from global pools of investment to meet the deep social needs we experience globally is attractive.
Does it translate to reality? Can investors get financial returns from impact investing? Sometimes, possibly. Do they? Occasionally. Is there much evidence? Outside of the US, with decades of programme-related investment experience, and international microfinance, emerging evidence. Generally, there are still track records to be built to evidence wider impact investing. Sir Ronald Cohen, a key figure in the social investment world, often draws the parallel with the early days of venture capital, which he is a pioneer of. It took decades to grow that industry in the UK. He is positive we can do the same for impact investing. He may well be right. There is progress, but even rapid growth from a small base, can feel slow at times, relative to the scale of need.
The Association of Charitable Foundations met earlier that week. ACF launched their research briefing Charitable trusts and foundations’ engagement in the social investment market, by Nikki Jeffries and Richard Jenkins. Surveying 80 UK foundations, they found £100 million committed to impact investing in the UK, with £50 million drawn and invested. While foundations are small players next to the social banks, they are significant players in providing risk money – where there is a risk of loss of capital. Most investors quite naturally shy away from this. Foundations, seeing the ability to achieve a social outcome that is worth the risk, are more willing.
I take a few key messages from these events. There are large pools of money out there, seeking a place to get a return from. They may well be able to come our way but the pipes and channels from where the conventional market is to where social need is at are not laid. It feels something like standing at the bottom of the Three Gorges Dam with a teacup in one hand, while someone at the top of the dam opens up a sluice gate to fill the cup with water. Will it be a trickle that evaporates before it reaches the bottom of the dam, or an overwhelming gush that smashes the cup?
Danyal Sattar is social investment manager at Esmée Fairbairn Foundation.