London could lead the global social impact investment market
The Cabinet Office has today endorsed new research which shows that London can become a global financial centre for Social Impact Investment (1) (SII) – if it creates more opportunities for retail investors, through a supportive regulatory environment and product innovation, and adopts global standards to capitalise on growth opportunities. The estimated size of the SII market globally is in excess of $12bn with significant growth potential (2).
The research, by PwC for the City of London Corporation, identifies a three-stage process to becoming a mature global financial centre for SII and highlights the key development challenges, so cities can evaluate their individual strengths and weaknesses in social impact investment.
There are six essential features which a city needs to excel in, in order to reach the next stage: knowledge and expertise, innovation in products and instruments, maturity and attractiveness of financial markets, favourable environment, social impact standards and reporting, and international connections.
Speaking as the report was launched, Mark Boleat, Chairman of Policy & Resources at the City of London Corporation said: “There are currently several strong domestic SII markets, with London one of these. However, the market has yet to coalesce around a global financial centre. As one of the world’s leading financial centres, with a reputation for innovation in financial services, a transparent legal system, and strong support from government, London is ideally placed to become that centre.”
Previous research commissioned by the Corporation with the Cabinet Office, Big Society Capital and Big Lottery Fund highlighted that the UK SII market is worth around £200m p.a. Building on the success of existing innovative products and mechanisms like the Social Stock Exchange and Social Impact Bonds to create more accessible products for international investors will help London move towards global success. In particular, enabling the large number of High Net Worth Individuals and retail investors based in the capital, UK and internationally, to invest in innovative SII products – such as the Threadneedle Social Bond Fund - will help grow the market and embed it more firmly in London’s financial centre.
To further improve London’s chances of success in the SII market, the report identifies that London needs to work at effectively embedding global standards such as the GIIRS and IRIS indicators used in the US, and the LuxFLAG certification in Europe (2). This will allow different investments to be comparable as is the case with mainstream traditional investments, thereby increasing investor knowledge, and potentially, appetite and take up of social impact investments.
Kieron Boyle, Head of Social Investment at the Cabinet Office: "Around the world, markets are increasingly asking the question of how they can maximise social value alongside financial value. The UK is seen as the most advanced country in the world for offering a robust infrastructure and support for social impact investors and enterprises. This research clearly highlights London's potential in enhancing the UK's role as a global leader."
Emily Khan, UK PwC Social Investment & Enterprise Team said: “Waiting for the UK market to generate a body of evidence and reach agreement on social value standards could arguably mean missing many of the opportunities available to growing the global market. Adopting global accreditation standards – that focus on operational objectives and commitments to deliver social impacts – could therefore be a good place to focus in the short term.”
Notes to editors
- Social Impact Investment is defined by the G8 Social Impact Investment Taskforce as “those forms of investment financing that intentionally target specific social objectives along with financial returns and measure the achievement of both”. For more information about Social Impact Investment, please see the City of London’s FAQs page: http://www.cityoflondon.gov.uk/business/supporting-local-communities/Pages/Social-investment-FAQs.aspx
- Research by JP Morgan and the Global Impact Investing Network (GIIN) ‘Eyes on the horizon’ (May 2014).
- The lack of a standard measurement of social impact to assess the effectiveness of a product or programme remains a challenge for the global SII market – especially the UK, which unlike other global financial centres does not have a standard accreditation model. Without this, funders find it difficult to compare investments in social value terms on a consistent basis.
Bella Longman, Media Officer, City of London Corporation
Tel: 020 7332 1906 / Mobile: 07809 334 327
About the City of London Corporation
The City of London Corporation provides local government and policing services for the financial and commercial heart of Britain, the 'Square Mile'. In addition, the City Corporation has three roles: (1) we support London’s communities by working in partnership with neighbouring boroughs on economic regeneration, education and skills projects. In addition, the City of London Corporation’s charity City Bridge Trust makes grants of more than €15 million annually to charitable projects across London and we also support education with three independent schools, three City Academies, a primary school and the world-renowned Guildhall School of Music and Drama. (2) We also help look after key London heritage and green spaces including Tower Bridge, Museum of London, Barbican Arts Centre, City gardens, Hampstead Heath, Epping Forest, Burnham Beeches, and important ‘commons’ in south London. (3) And we also support and promote the ‘City’ as a world-leading financial and business hub, with outward and inward business delegations, high-profile civic events, research-driven policies all reflecting a long-term approach. See www.cityoflondon.gov.uk for more details.