Should the banks be interested in social impact investing?

Social impact investing offers banks an opportunity to reconsider how, and why they do business at a very fundamental level. Social investment could be an enormous market opportunity, and many believe it represents the investment philosophy of the future.

Banks have both the skills and resources to play a defining role in the scaling of venture philanthropy and social investment on a global basis. They also need to participate in this field, not only because it presents an opportunity, but there is a risk that, if they do not, they will be left behind.

The CEO of Deutsche Bank UK, Colin Grassie, addressed the G8 conference in London in 2013 describing social impact investing as “a new model of sustainable capitalism”. Impact investing is gathering momentum and the recent FT article “Social Funds make an impact” noted that the institutional investment sector is getting involved, led by Axa Group.

Investors are increasingly interested to explore the concept of impact investing, using capital explicitly to create social, or other non-financial benefits as well as financial returns.

As an example, GAWA Capital, based in Madrid, has helped over 120,000 people through their Microfinance Fund launched in 2010, and now posting returns to investors and on target for an IRR of 8-11%. This fund supports social entrepreneurs in under-served and low-income markets on a global basis, and has recently appointed the Ruffena Capital team to raise €30m in London for their second fund.

Click here to see a very useful report by EVPA – Social impact strategies for banks – venture philanthropy and social investment.

By Mark Bunting, mark.bunting@ruffena.com