In recent years, impact investing has gained significant popularity among investors and businesses in the UK. Impact investing refers to investments made with the intention of generating positive social or environmental impacts alongside financial returns. The UK has emerged as a leading hub for impact investing, with increasing numbers of investors allocating capital towards enterprises and funds that aim to create measurable improvements for people and the planet. There are several key factors driving the rise of impact investing in the UK, as well as important benefits it brings to British society.
Growing Interest in ESG is Propelling Impact Investing Forward
One of the main drivers of impact investing growth in the UK is the rising focus on ESG (environmental, social, governance) principles among investors. According to the Global Impact Investing Network (GIIN), over 90% of impact investors consider ESG factors in their decisions. As UK investors become more attuned to ESG risks and opportunities, they are recognizing impact investing as an effective strategy to target both financial and social returns. Major UK investors like abrdn, M&G Investments and Schroders have been launching new impact investing funds to meet increasing demand.
Government Policy Supports the Impact Investing Ecosystem
The UK government has also played an instrumental role in catalyzing the impact investing market through supportive policies and initiatives. In 2021, the Department for Digital, Culture, Media and Sport published an impact investing roadmap to channel more institutional capital towards impact-driven businesses. The British Business Bank’s Impact Investment Fund provides growth capital to enterprises delivering positive social outcomes. Tax incentives for social investment have further stimulated impact investing activity among UK investors. Government backing has helped legitimize impact investing and given investors confidence to enter this rapidly growing field.
Focus on Social Enterprise is Boosting Deal Flow
The UK has a vibrant social enterprise sector, with over 100,000 social enterprises contributing £60 billion to the economy annually. Many of these mission-driven organizations are seeking impact investment to scale their operations and deepen their societal impacts. Intermediaries like Big Issue Invest are supporting the growth of social enterprises and facilitating impact investing deals. Robust deal flow is a crucial ingredient for the development of any investment market, and the UK’s thriving social enterprise ecosystem is providing no shortage of impact investing opportunities.
Impact Investing Aligns with British Values and Youth Preferences
Culturally, impact investing resonates with British values like compassion and concern for the disadvantaged. The British public consistently ranks issues like poverty alleviation and climate change as top priorities. Impact investing enables individual investors to align their capital with their values. Additionally, studies show younger investors are twice as likely to invest in companies targeting social or environmental impacts. With UK millennials set to inherit billions over the next decade, their preferences will further accelerate the adoption of impact investing strategies.
Impact Investing Can Drive Meaningful Change in the UK
Most importantly, impact investing is gaining traction because it offers real-world solutions to issues like financial exclusion, unemployment, affordable housing shortages and climate change mitigation. Through innovative business models and smart investment strategies, impact investing can address systemic challenges and meaningfully improve socioeconomic outcomes for disadvantaged populations across the UK. As more UK investors embrace their power to drive change through capital allocation, impact investing will continue its upward trajectory and cement its place as a driving force for good.
Impact investing has rapidly gained momentum in the UK due to factors like rising ESG adoption, supportive government policies, a thriving social enterprise sector and shifting cultural values. By channeling more investment capital towards enterprises creating measurable social and environmental impacts, impact investing can help tackle pressing issues in British society while also producing solid financial returns.