Why Is Social Investment Important?

Since the end of the Second World War, Government has taken on the responsibility for ‘society’ – providing care and benefits for the vulnerable, unemployed and aged.  Previously, this responsibility had fallen on the Church, landowners or industrialists with varying degrees of success.

On the whole Government has done a pretty poor job and now finds that it does not have the resource to pay for this responsibility.  We are part way through a seismic shift, whereby Government is reducing its importance and moving this to a third sector – the voluntary or social sector.  

To build up resource from a very low base, the third sector requires investment.  This will come from Government, either directly or via funded bodies and from private investment through companies, charitable foundations and individuals.

Tax Incentives

To encourage investment the Treasury, Cabinet Office and HMRC have consulted on the structure of tax incentives.  Almus Wealth was directly involved in talks with the Financial Advisers’ Working Party and investment incentives and reliefs are widely available.

*The value of investments can fall as well as rise and you may not get back the amount invested.

What Is Impact Investment? 

Every investment has an impact.

Impact investment intentionally places new capital in businesses and funds that seek a financial return alongside a measurable positive social and/or environmental impact.

Impact investment intends to create positive impact in addition to a financial return.  There is a perception, now largely debunked, that investing ‘ethically’, ‘sustainably’ or ‘for impact’ may have a negative impact on financial returns and that this might be too big a price to pay for investors. Thankfully there is a wealth of empirical evidence, which shows this not to be the case.

There is, however, some confusion around the terms (hence the speech marks in use above) and we will help you to understand the differences and - more importantly - align your own values with how your money is invested and who benefits from your investment!

Moving on to Social Investment, which should not be confused with Impact Investment (but often is….) the UK has been at the forefront in recent years in the evolution of supporting more local initiatives, which is generally referred to as ‘Social’ investment. Further encouragement has been introduced through tax incentives and Almus Wealth was brought on to the Treasury Adviser Taskforce to develop the tax incentives through ‘Social Investment Tax Relief’ or SITR. The tax incentives here are generous as, without them, individuals may not decide to undertake this type of investment in to smaller social enterprises, community interest companies or charities.

It is true that an investor in UK companies, for example, may fill up their car at a BP petrol station or hold accounts with HSBC or choose to shop at Tesco but there is very little connection with the company (and ultimately with their investment).  It is also true that investors feel they have very little influence in how the business is run; how much executives – or employees - are paid or how ethically materials are sourced, for example.

By contrast an investor in a social enterprise is provided with regular updates on progress and social impact and may decide to visit the social enterprise, which we wholeheartedly encourage.  This has always been the case - although reporting and impact have improved in recent years – yet the sector had remained relatively niche until recently.  Successive Governments have created greater incentives for private investors through generous tax reliefs and we believe that recent initiatives will be the catalyst to more investors giving greater thought to how their wealth is allocated.