In recent years, there has been a noticeable shift in the investment landscape, with a growing emphasis on social impact alongside commerciality and financial returns. This trend towards social investment reflects a broader societal recognition of the importance of addressing the most pressing global challenges whilst generating sustainable profits that create a lasting legacy. According to a report by the Global Impact Investing Network (GIIN), the impact investing market has experienced significant growth in recent years. In their 2020 Annual Impact Investor Survey, GIIN found that respondents reported a total of $715 billion in impact investing assets under management, representing a notable increase from previous years. As we look towards the future, it’s clear that social investment is poised to dominate the investment space, reshaping traditional notions of wealth creation and financial success.
One of the key driving forces behind the rise of social investment is the increasing demand for responsible and sustainable investing. Investors, particularly millennials and the younger generation, are becoming more conscious of key environmental, social, and governance (ESG) factors associated with investments. They seek opportunities to align their own financial goals with their values, supporting companies and initiatives that prioritise positive social and environmental impact – whether it be through their own personal savings and investments or in the roles that they are increasingly taking up in the industry itself.
Moreover, governments and regulatory bodies are increasingly advocating for sustainable financial practices, introducing policies and incentives to encourage social investment. From tax benefits for impact investors to mandatory ESG reporting requirements for corporations, these initiatives are creating a conducive environment for the growth of the social investment space.
The COVID-19 pandemic further underscored the importance of social investment as businesses and communities grappled with unprecedented challenges and an uncertain future. The crisis highlighted the interconnectedness of social and economic well-being, prompting investors to re-evaluate their priorities and allocate capital towards initiatives that address systemic social issues such as healthcare, education as well poverty alleviation.
Looking ahead, the trajectory of social investment is poised for continued growth and expansion. As impact measurement tools become more sophisticated and transparent, investors will have better insights into the social and environmental outcomes of their investments. This increased accountability will drive further adoption of social investment practices across the global financial sector.
To fully realise the potential of social investment, collaboration and innovation will be essential. By fostering partnerships between investors, entrepreneurs, and policymakers, we can unlock new opportunities for sustainable development and create a more inclusive and resilient economy for everyone.
References
Emerson, J., & Twersky, F. (1996). New Social Entrepreneurs: The Success, Challenge, and Lessons of Non-Profit Enterprise Creation. Roberts Foundation.
Nicholls, A. (2010). The Institutionalisation of Social Investment: The Interplay of Investment Logics and Investor Rationalities. Journal of Social Entrepreneurship, 1(1), 70-100.
Brest, P., & Born, K. (2013). When Can Impact Investing Create Real Impact? Stanford Social Innovation Review.
Jackson, E. T. (2013). Interrogating the Theory of Change: Evaluating Impact Investing Where It Matters Most. Journal of Sustainable Finance & Investment, 3(2), 95-110.