Engaged Investment has launched a pilot to test the creation of the world’s first investment index for the growing emerging market of social investment (‘impact investing’, as it is called globally). This is an important next step forward towards creating the infrastructure needed for the global expansion of social finance. 

The purpose of this index is to make impact investing marketable as an asset class to wider groups of institutional investors including private wealth management. This will enable impact investing to access broader and deeper sources of capital to get more money into social enterprises, charities and other investments for social purpose. 

The idea of the index is to bring together in one place the investment data that investors need to assess this new market and its suitability for investment. This will be published as aggregated investment data for the market as a whole and by segment. Confidential information about funds and investees will be protected. The index will allow investors to answer crucial investment questions for the first time about the market, including how big is the market?, what is the level of current activity?, what is the yield of impact investing?, and what is the risk in impact investing?

Bringing together financial and impact data for the market, the index will analyse the market by sector, geography, and stage of development of investees, and will sub-divide the market into debt, equity and quasi-equity. Being financially as well as socially oriented, this index is complementary to the work Big Society Capital is doing or has commissioned on standards and definitions, specifically for impact reporting.

The pilot launch follows a kick-off meeting held with five of the UK’s leading social impact investors. The meeting was held on 8 November 2012 at the Guildhall in London with the support of the City of London Corporation and ACEVO Solutions. The City of London Corporation’s charity City Bridge Trust, Big Society Capital and Cabinet Office have offered cornerstone funding. Engaged Investment will present the pilot and report the evaluated results and conclusions in 2013.

As well as looking at a beta index compiled initially from a sample of UK data, the pilot will include the creation of an Index Steering Committee that will agree common data standards and definitions for the investment reporting and classification of impact investing. The Index Steering Committee will be an informal assembly of social sector and financial sector stakeholders, run on an open collaborative and practitioner-led basis, chaired by Engaged Investment. It will include impact investors, participants from mainstream investment and mainstream capital markets and other leading UK and international participants and commentators on the impact investing market. Engaged Investment was founded by Dr Rupert Evenett and Karl H Richter, who bring together financial, charity and social investment experience. The Index, conceived and developed by the founders, is an example of bringing together this experience and adapting financial market structures for social purpose. 

Engaged Investment Co-Founder and Joint Chief Executive Rupert Evenett said: “Investment loves an index and needs benchmarks. Richer market-wide investment data, clarity on risk and return and an index for investors are key steps in defining how emerging markets successfully emerge. An index helps impact investing to reach out to mainstream investors without diluting its focus on impact.”

Engaged Investment Co-Founder and Joint Chief Executive Karl H Richter said: “This market needs a single reference point for robust time series data, where investors know they can research and benchmark the market to support their asset allocations and compare impact investing with other investment markets, as well as looking at it in comparison with their philanthropic and socially responsible investing or ethical investing activities.”

Sir Ronald Cohen, a leader in UK social investment, said: “Social investment will need market-wide investment data for it to mature as an asset class – there needs to be a ‘Bloomberg’ for social investment.”

Nick Hurd MP, Minister for Civil Society, writing to Engaged Investment on the Index, said: “I would like to offer my support for Engaged Investment’s project to create and launch an investment index for the social investment market. This is the sort of initiative which an emerging market like social investment needs.”

Mark Boleat, Chairman of the Policy & Resources Committee at the City of London Corporation, said: “A social investment index would be yet another global ‘first’ for the marketplace, and again, the UK is in the lead. The City of London Corporation is glad to support this pilot, as part of its vision to place London at the centre of social investment globally.”

Notes to editors:

1. Impact investing, called social investment in the UK, is a form of investing which offers both a social return and a financial return. It is distinguished from philanthropy by using investment to finance social purpose activity instead of grants. It is distinguished from mainstream financial investment by targeting investment in activity aimed at creating social or environmental benefits and by expecting a blended return. It is a growth market and a global market in which the UK is a leader. For the UK, The Boston Consulting Group recently forecast a market size of £1 billion by 2016 (Sept 2012, The First Billion: A Forecast of Social Investment Demand, The Boston Consulting Group). Globally, JP Morgan has forecast a market size for impact investing of $1 trillion by 2020 (Nov 2010, Impact Investments: An emerging asset class, JP Morgan).

2. City Bridge Trust is a major charitable foundation which supports charitable activity across Greater London. The City of London Corporation is the trustee of City Bridge Trust. 

3. Big Society Capital is an independent financial institution, established originally by the UK government to develop and shape a sustainable social investment market in the UK and to invest in social investment financial intermediaries to support their work in investing in front line social organisations and in developing the social investment market. 

4. ACEVO Solutions is the consulting arm of ACEVO, which is the Association of Chief Executives of Voluntary Organisations and is the leading voice for chief executives in the third sector, with over 2,000 members nationwide.

5. Rupert Evenett is Co-Founder and Joint Chief Executive of Engaged Investment. He was a corporate financier and capital markets banker for twenty years and in the nine years since 2003 has been in the public sector as a civil servant and held various roles in the front line charitable sector and social investment sector. From 2005-11 he was Chair of national volunteering and environmental charity The Conservation Volunteers (formerly BTCV) and has also been a director and on the investment committee of The Social Investment Business, one of the UK’s largest social investors.

6. Karl H Richter is Co-Founder and Joint Chief Executive of Engaged Investment. He trained as an architect and has a background in urban regeneration and development, has an MBA combined with experience in advocacy, policy and consulting work in social investment and is an acknowledged writer and expert in impact investing. He speaks regularly at conferences internationally and is adviser to the Euclid network of European civil society organisations on social investment.

7. For further information, contact: contact@engagedinvestment.com