A review commissioned by the Department for Digital, Culture, Media and Sport has found that while interest in investments that have a positive impact on society is strong, the range of such opportunities is limited.
The review was chaired by Elizabeth Corley, chair of Allianz Global Investors, and comprised feedback on impact investing from 60 professionals operating in the sector.
The 50-page report stated: “There is a growing interest among individuals for their investments to have a positive impact on society, as well as produce financial returns.
"However the social impact investing market remains underdeveloped."
UK retail social impact investment opportunities were found to be available across all main asset classes and exceed £87bn.
But the report stated the government should act to increase the number of co-investment opportunities, and make it easier for people to invest.
The review found the social sector should look to increase reporting of the growth of the social impact investment market to give the financial services community a better understanding of the non-financial outcomes.
One of the key recommendations of the review was the industry should engage widely to improve professional skills for social impact and work with academics and service providers to develop a robust performance/outcome evidence base.
Fund managers were also told to develop initiatives to sustain momentum and ensure quality as the market develops and to provide tools and training for pension scheme trustees and independent financial advisers.
The review also calls for professional bodies, such as the CFA Institute, the Chartered Institute for Securities & Investment (CISI) and the Chartered Insurance Institute (CII) should accelerate professional development around ESG and social impact investment.
The bodies were told to do this through CPD and professional qualifications.
Exam bodies were also told to work with the industry to ensure the use of common terms across educational materials.
Tracey Crouch, minister for sport and civil society, said: "We want people to make investments that reflect their values and have a positive impact on the issues they care about.
"These recommendations are an important first step and I look forward to working closely with the industry to bringing social impact investment into the mainstream.
Stephen Barclay, economic secretary to HM Treasury, said: "Social impact investing has the power to make a positive change in society, while also bringing positive financial returns. It’s a win-win, which is why demand is growing.
"The market has enormous potential, but we need to make it easier for people to make a social impact investment. Today’s recommendations will help make this possible."
Ms Corley, vice-chair of the Advisory Group, said: "Drawing on the deep experience of our members, we have outlined a number of recommendations, allocated to specific market segments, that we believe will contribute to building a sustainable culture of social impact investing in the UK.
"Interest among individuals in seeing their savings and investments doing social and environmental good continues to grow and we hope this report and its recommendations will contribute to the work being done to keep the UK at the forefront of the social impact investing market."