In December 2014 EngagedX was commissioned by the Social Investment Research Council (SIRC) to undertake an independent study into the financial performance of the UK social investment market. The project produced the first aggregate benchmark data for the historic performance of deals in the UK. It was also the first time that social investment data from multiple investors had been combined into a single, comparable dataset.
“I am glad to see that a careful, and data-oriented, study of social impact investing is being made. So much research effort is spent on studying investments, it is nice to see this focus on social impact investments.”
Robert Shiller
Economics Professor Yale University and 2013 Nobel Laureate
The project – Improving Infrastructure to Price Social Investment – was a competitive tender initiated by the SIRC to redress the lack of appropriate risk and return data in the market. This kind of data is essential for investors, social sector organisations, financial intermediaries, as well as independent financial advisers and wealth managers amongst others. Developing a better understanding of risk and how to price risk has been regarded one of the key barriers to growing the social investment market. This commission follows the successful piloting of a data index for social investment (by EngagedX) to test the viability of aggregating historic data from UK social investment fund managers.
Objectives
To develop a better understanding of the key characteristics and performance of social investment products (including loans and other investments) over time from historical transactions in the social investment market, notably including:
- Investment performance;
- Default and recovery rates;
- Relationship between risk and price; and
- If there was any "implied impact" pricing discount
The anonymised performance data was published on 5 June 2015 on the UK Government’s open data portal. The source data was provided by CAF Venturesome, Key Fund and Social Investment Business on both debt and equity investments made between 2002 and 2014.
In order to undertake this work, EngagedX developed a proprietary data model that is able to generate comparable benchmark data. This universal data model was developed with the view to being shared as an industry asset of public benefit. The data model includes algorithms and programmatic rules that is able to handle inconsistent and poorly structured data from multiple sources, as well as to use pattern recognition to forensically process data for analysis and aggregation. The mathematical veracity of the model has been independently verified by the Boston Consulting Group. It has also been designed to be extensible with impact data in due course.
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About the Social Investment Research Council
The Social Investment Research Council is a coordinated initiative which draws together research commissioners from key organisations in the social investment market from the public, private and social sectors.
The aim of the Social Investment Research Council is to help advance the UK social investment market through consolidating research efforts to generate powerful and practical insights for the benefit of social sector organisations and investors.
The Council was launched on 31st October 2013 with Big Lottery Fund, Big Society Capital, the Cabinet Office, Citi and the City of London as founding members.
