Social investment starting to bear financial and moral fruit together

The survey of nearly 100 institutions showed that 98 per cent were happy with the social impact their portfolios were having, while 89 per cent were happy with the financial returns

When you invest in a social enterprise, you’re promised not just financial returns but social goodness too. Too often, however, the financial returns fall by the wayside as social entrepreneurs prioritise doing good over making money.

But according to a survey from earlier this year, both financial and social returns are looking healthy. The survey of nearly 100 institutions with social (or impact) investments by the Global Impact Investment Network and JP Morgan showed that 98 per cent were happy with the social impact their portfolios were having, while 89 per cent were happy with the financial returns. 21 per cent said financial returns had exceeded their expectations.

Those financial institutions, as you might expect, do not in the main see social investment as charity by another name: 65 per cent told the survey they expected market rate returns; the remaining third were prepared to accept below market rate returns. The third most popular reason for social investing, according to the survey, was that they are financially attractive relative to other investment opportunities, staking a case for social investment beyond good will. (The top two reasons were responsible investing and an efficient way of meeting impact goals.)

The calculation of social impact has in part been enabled because GIIN have a measurement for the effects of investment on communities: the Impact Reporting and Investment Standards (IRIS). Metrics used in IRIS include beneficiaries (eg client retention rate), employment (eg employees trained), governance (eg objectives assessment) and financial performance (eg net income).

All of this goes to show that while social investing is more often associated with companies throwing money at good causes, expecting no returns, it can in fact be a proper part of a portfolio. The UK government has endorsed this by helping to set up Big Society Capital, a bank lending exclusively to social enterprises.

Not everyone thinks this is a reliable sector, however. One person who used to work in social enterprise told me: ‘The people in that sector haven’t worked out whether they’re in it to make money or for social impact.’ From this survey, it’s clear they can be in it for both – and that there’s more than one kind of wealth.