Centre for London's 2022 report In London and For London: Impact investing for the capital highlighted the ways in which this form of intentional investing can do more to address key challenges facing London and its people. The report highlights the potential that impact investing has to help tackle poverty and inequality in the UK, particularly for the Black community which often faces exclusion from mainstream finance.
Impact investing is defined as the process of directing investments into companies, organisations, and funds with the intention of generating a financial return alongside positive, measurable social impact. This form of investment creates a mutually beneficial financial ecosystem for both investors and the communities themselves.
Based on the report findings, impact investing is a step towards providing opportunities to invest in solutions to social and environmental challenges by closing the gap between what traditional finance is able to provide and the resources, skills and tools needed to tackle inequality.
Centre for London has identified five key ways to support and grow impact investing in the nation’s capital:
1. Make access to capital more inclusive: Create funds for minority led projects and champion diversity in the sector.
2. Reflect real needs: Asset managers should ask organisations applying for funding to demonstrate that it’s what the people who benefit want and need.
3. Fill gaps in the market: Expand funding for early to mid-stage SME projects seeking £100-300k and blended finance options for projects with deep impact but limited scalability.
4. Build connections and community: To help connect the right type of capital with the right project at the right time, the Greater London Authority (GLA) should provide a forum for investors.
5. Talk clearly about aims and impacts: To reach more people, the sector needs to speak the same language. It should work on common definitions of goals and measurements of impact.
Lord Victor Adebowale CBE says in his forward for the 2022 report Reclaiming the Future: Reforming Social Investment for the Next Decade the following:
“We need existing social enterprises to grow faster if we are going to deliver the social and environmental change we need in the timescales that people and planet demand. Unfortunately, too many social enterprises have to rely solely on organic growth, reinvesting their surpluses year to year. Yet investment can help social enterprise grow faster, just like any business. This is why social investment is important, to channel capital into the best of British business.”
It is no secret the importance of social investment and yet the current momentum leaves much to be desired. In a hackathon hosted by Common Call last year, we were able to look at systems change and engage in a deep dive conversation into the real-life struggles of small social enterprises and charities, our thoughts on the experience will be published in a post soon, and we hope that it reflects the spirit of the reports mentioned above and the ways in which we can work together to overhaul existing systems.
In addition, keep an eye out as we will also be announcing the integration of social investment into Common Call’s mission in a future post.
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