What Is Impact Investing?
Things are changing in the investment world. There was a time when the financial return on your investment was the only consideration of importance. These days however, many more people want more than just a good return on their investment.
They want to know that they are making a contribution towards tacking the the social and moral issues of our age, whether that be poverty, discrimination, disease, war, or climate change.
Impact investing is an increasingly popular choice for people who are looking to make a positive difference to their community and the natural environment.
More and more investors are searching out ways to put their savings to good use. This could mean investing in initiatives that provide access to clean water, affordable housing, medication, education, or clean renewable energy.
Before Impact Investing; The Bad Old Days
Traditionally people made investments for the singular purpose of earning themselves (and their heirs) a good return. It was not uncommon for investors to place their holdings in the hands of whichever fund manager promised the best return. This could easily mean that people ended up unknowingly sinking their cash into anything from oil to weapons to sub-prime mortgages.
For many investors, the financial crisis of 2008 brought home the fact that all too often their money was being invested where it shouldn’t be and not only was this causing economic instability, but it was also ruining millions of lives around the world.
The rise of socially responsible impact investing
Thankfully, things are now changing, and many 21st Century investors are determined to achieve more than simply increasing their bank balance.
In addition to actively avoiding investments which can cause harm to others and to the environment, people now want their investments to achieve a measurable and meaningful impact.
They want to create a legacy that they can be proud of and to feel they are part of a movement that is changing the world for the better. They want their money to do good.
In addition to providing an attractive financial return to investors, impact investing provides an opportunity for people to mobilise their savings for the benefit of greater society. In this way, investors can rightly be proud of the great things that their money has helped to deliver, whether that is bring solar panels to a local school, providing affordable electric transport for their local community, or building affordable housing for local households.
Bringing investing to a wider audience
In addition to a change in the type of investments people are making, there has also been a big shift in the kind of people that are investing.
No longer is the realm of investment confined to ‘High Net-Worth Individuals’ and fund-managers from the shadowy corridors of Canary Wharf. Many impact investment opportunities have a relatively low threshold of minimum investment (at BHESCo our minimum investment amount is £500). This makes it much more achievable for everyone to become shareholders and investors.
Furthermore, the unstoppable rise of the internet has made information about impact investing much more widely available. People can do their own research just by typing a phrase into Google or by asking friends for recommendations on Facebook or Twitter. This also helps to foster the feeling of being part of a community that’s tired of the old regime, and is coming together to create real positive change in the world.
Brighton and Hove as a hub for impact investing
Brighton and Hove is well known for its progressive and forward thinking environment, which has helped to cultivate an abundance of innovative social enterprises for such a small city.
The local ethical investor is spoilt for choice with opportunities to invest in businesses which are creating a better world. Whether that’s investing in the UK’s first solar bus fleet or buying shares in an ethical supermarket there’s plenty of scope locally to support something ground-breaking.
No doubt many social entrepreneurs feel convinced that Brighton’s liberal and eco friendly ethos is the ideal place to establish their fledgling business. As well as being home to the UK’s only Green Member of Parliament, Brighton has made a name for itself as a leading city in the digital and tech sector.
Delivering positive social and environmental impact with your savings
Speaking to some of our BHESCo shareholders it is clear that these are the types of motivations that drew so many investors to our co-operative.
For some, it was the promise of supporting the growth of renewable energy and energy efficiency in the UK, while others wanted to support work that tackled fuel poverty in Brighton and Hove, a service which literally saves lives each winter.
One thing is for certain – people are coming together around the world to use their money collectively to champion causes that they believe in. The days of the greedy stock-broker are diminishing. It’s time for a new type of investor to take the lead; one with a clear purpose, consciousness about their role on the planet and conviction that they will change the world with the resources they have.
Gandhi’s famous challenge for people to “be the change you want to see in the world” has never been more compelling.