Social impact investing set to be ‘more prominent’

The chief executive of Big Society Capital said the FCA has been engaging with the financial services industry to help bring social impact investing to the UK.

Mr O’Donohoe said: “We have had many conversations with the FCA and together with Gavin Francis at Worthstone, we have done a lot of work on ‘suitability’, which seems to be the regulator’s watchword.”

He admitted that financial advisers may still be hesitant to get involved with the nascent social impact market, stating there was “no shortcut to a five-year track record” and the entry level of investment was still quite high.

Article continues after advert

However, Mr O’Donohoe said there was no difference between the due diligence advisers do on standard bonds and the due diligence needed on social impact investments, so understanding the products would not be difficult.

With the launch of diversified retail bond funds, such as the Threadneedle Investments’ Social Bond Fund last year, he said more advisers would be brought on board.

Mr O’Donohoe added: “There is client appetite for this and, post RDR, advisers are looking to differentiate their offerings for clients. This is a whole new way of investing to address a certain issue and it will become more prominent in 2014.”

Adviser view

Mark Hoskin, partner at London-based Hoskin & Partners, said: “We still do not know what the rate of tax relief will be and it is not clear whether it will have any impact on the IFA community and investors because the cap on funds raised for each offer is Euro 200,000 and thus is not something we are likely to touch. If the government get state aid approval and the fund-raising cap is in line with an EIS company of £5m, then this could have a real impact.”