We have seen how social problems transfer from one community to the next, from one generation to another, and how money markets seem to pass these problems by. Philanthropy, ill equipped as it is to deal with the scale, has been left to pick up the pieces. By investing repayable and recyclable capital into tackling social problems, two types of returns are generated: financial returns to investors, but social returns to investors and to society more generally. This is empowering, efficient and necessary. Social impact investment is the provision and use of capital with the aim of generating social as well as financial returns. This type of investment carries an expectation of repayment of some or all of the finance. It can cover loans, equity, bonds, and is sometimes used alongside other instruments, such as guarantees or underwriting. As with any other investments, where the investee business performs well, returns generated may be principally reinvested in the business, as well as offering a limited proportion of these to investors.
Investors in social outcomes weigh up the balance between the social and financial returns which they expect from an investment, according to their own priorities.
They may accept lower financial returns in order to generate greater social impact.
Find out more
A Brief handbook on Social Impact Investment A UK perspective
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