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A blueprint for retail impact investing

A Triodos Bank report

15-09-2014 | The Triodos Bank report on retail impact investing is one of the subject papers produced for the overall report on " Impact Investing" published by the Social Impact Investment Taskforce established by the G8.

The Triodos Bank report builds on the key finding of the Taskforce and focuses specifically on extending retail impact investment.

The report builds on the notion that the entire concept of impact investment is designed to stimulate more direct connections between society and social entrepreneurs in the real economy and therefore should evolve more inclusively.

Many retail impact investment vehicles predate the term "Impact investment" and offer a very promising platform to be built on globally.

Key elements

  • A large proportion of people and financial advisors (72% of financial advisors in the US; 73% of people in the UK with net wealth between £50,000 and £100,000 – see report for references) are interested in impact investing; only a very small proportion of individuals are able to access impact investments.
  • The key market barriers are retail financial regulations and lack of tax incentives. Despite this, there are many organisations actively making impact investments funded by retail investors – including banks, specialist funds, cooperatives, CDFIs and crowdfunding platforms.
  • The global impact investment market is growing strongly (at around 20% per year) to an estimated $12.7bn of new investment in 2014, and aggregate volumes of $46bn, the growth has been fuelled largely by institutions, philanthropists and foundations.
  • Existing success stories in retail impact fund models – such as the Dutch Green Funds ($9 bn) or the French ‘Solidarity’ Pension Funds ($7.7 bn) – could form the basis for regulations to support a new wave of retail products allowing individuals to invest in the entrepreneurs and ventures in the real economy that they want.
  • Whilst crowdfunding is growing very quickly (1000% growth over the past 5 years amounting to $20 bn) we believe that there is even greater potential in professionally managed, regulated, retail impact investment funds.
  • There are currently regulatory discussions – for example in crowdfunding and the European Long Term Investment Funds – which could transform the market. It is important that these opportunities are used to stimulate broader access to high social-impact ventures through professionally-managed financial vehicles.

Our recommendations

  • We propose that governments, regulators, investor groups, intermediaries and the impact investment community join the debate on this issue to further the development of an inclusive impact investment market.

Triodos Fair Share Fund

One of the first funds enabling Dutch private investors to invest in microfinance.