The Evolution of Social Finance and Investment Over the Last Decade

Over the last decade, social finance and investment have undergone significant transformations, reflecting a growing commitment to aligning financial returns with positive social and environmental impact. This evolution has been driven by a confluence of factors, including increased awareness of global challenges, technological advancements, and changing investor preferences.

In the early 2010s, social finance was often seen as a niche market, with limited options for investors interested in impact investing. Traditional financial institutions were wary of integrating social and environmental considerations into their investment strategies. However, as the decade progressed, there has been a noticeable shift. The United Nations’ Sustainable Development Goals (SDGs), launched in 2015, provided a global framework for addressing critical issues such as poverty, inequality, and climate change. This initiative galvanised both public and private sectors to consider the impact of their financial and commercial decisions.

Technological advancements have also played a pivotal role in this transformation. The rise of Fintech has democratised access to social investment opportunities, enabling a broader range of investors to participate. Crowdfunding platforms and blockchain technology have facilitated transparency and traceability in social finance, making it easier for investors to track the impact of their investments.

Furthermore, there has been a significant increase in the availability of financial instruments tailored to impact investing. Green bonds, social bonds, and sustainability-linked loans have become mainstream, providing investors with diverse options to align their portfolios with their values. Asset managers and financial institutions have developed robust frameworks for measuring and reporting impact, helping to build trust and credibility in the sector.

Investor preferences have also evolved, with both Millennials and ‘Gen Z’ driving demand for responsible investing. These generations prioritise companies and funds that demonstrate a commitment to social and environmental sustainability. As a result, there has been a surge in the establishment of impact investment funds, socially responsible investment (SRI) products, and environmental, social, and governance (ESG) criteria.

As we look to the future, the continued growth and maturation of this sector hold promise for addressing some of the world’s most pressing challenges through the increasingly important vehicle of sustainable finance.

References

Bugg-Levine, A., & Emerson, J. (2011). Impact Investing: Transforming How We Make Money While Making a Difference. San Francisco: Jossey-Bass.

Global Impact Investing Network (GIIN). (2020). 2020 Annual Impact Investor Survey. Available at: https://thegiin.org/research/publication/impinv-survey-2020

United Nations. (2015). Transforming our world: the 2030 Agenda for Sustainable Development. Available at: https://sdgs.un.org/2030agenda 

Bouri, A., Mudaliar, A., Schiff, H., Bass, R., & Dithrich, H. (2018). Roadmap for the Future of Impact Investing: Reshaping Financial Markets. Global Impact Investing Network. Available at: https://thegiin.org/research/publication/impact-investing-roadmap