By Thomas Gillan, Director, SIS Ventures
OVER the past 10 years we have witnessed some truly game-changing developments in the world of finance. On the back of one of the worst financial crises in living memory, distrust of large institutions has grown, consumers have become increasingly empowered, and a new generation of socially-conscious business leaders and investors has emerged.
While the idea of ethical investing (or avoiding exposure to certain industries based on moral or ethical principles) has existed for many years, only recently have we witnessed the growth of investing in companies on the basis of their social or environmental impact.
Where once the notion of impact investing failed to secure much attention among the international investor community, now it has become an area of considerable interest. According to the Morgan Stanley Institute for Sustainable Investing, in 2017 75 per cent of investors said that they’re interested in impact investing, or putting their money behind companies that make a positive difference in the world. Unsurprisingly, millennial investors are leading the way. According to the same report, they are twice as likely as the average investor to invest in companies or funds that target social or environmental outcomes.
These new “mission-driven businesses” (businesses that focus on the achievement of both conventional business aims alongside a clear and definable social mission) require investment that is aligned with these dual business objectives, something that is not yet widely acknowledged by more conventional forms of investment.
Through the launch of SIS Ventures, we plan to provide the tools and mission-aligned investment required to help early stage businesses and social enterprises grow and deliver social impact at scale.
Over the next three years, SIS Ventures is looking to raise up to £5 million of new funding – utilising both Social Investment Tax Relief (SITR) and the Enterprise Investment Scheme (EIS). The first of these funds, Impact First, is currently open to prospective investors. Benefiting from both Enterprise Investment Scheme (EIS) relief and Social Investment Tax Relief (SITR), Impact First will offer investors a portfolio of between six and 12 high-growth potential, high-impact enterprises which aim to tackle a clearly identifiable social problem with a scalable and disruptive business solution.
The first close seeks to raise £2m from UK-based private investors, with the capital targeted for deployment over 12-18 months. Investments will target EIS (equity) or SITR (debt) qualifying companies.
Such ambition would be impossible without a belief that there is sufficient appetite from the investor community to choose to invest their money in impact funds over traditional funds. Traditional wisdom would have it that investing to generate positive environmental and social impact means sacrificing financial gains. We aim to challenge this binary assumption: previous reports have shown that companies that perform well on material environmental, social and governance factors can outperform peers. Impact investing continues to gain traction because investors shouldn’t always expect inferior returns. We believe in creating stakeholder value and not just shareholder value, we can help shape a more symbiotic and impactful society.
As one of the UK’s leading financial hubs outside of London, Scotland can play a leading role in marrying its expertise within investment to its experience in social enterprise. The prospect of developing a mission-driven sector with global scale is one that truly excites us. The launch of Impact First now provides us, and Scotland, with a mechanism to help turn this prospect into reality, by supporting and investing in entrepreneurs who are passionate about making a difference.
* www.sisventures.com
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