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EXCLUSIVE GUEST ARTICLE: Investing For Good - Impact Investing And New UK Tax Relief

Greg Moss, Bond Dickinson, Senior Wealth Advisor , 19 May 2015


A new form of tax relief is designed, proponents hope, to drive what is known as impact investing in the UK, but how effective will it be and how should investors approach it?

Where do SITR qualifying investments fit in for investors?
From the perspective of investors (and their advisors), while social investment is a really exciting third way between philanthropy on the one hand and investing for financial returns on the other, it should be treated with a degree of caution.

Without the ability to properly factor the expected risks of these products, or their correlation with the other moving parts of a portfolio, they should not be relied on as part of an investor’s strategy to support core financial planning goals. The risk and returns are simply too unknowable at this point in time.

For that reason, such investments should still be seen as a separate asset class, which should not be relied on for financial returns. The motivation for investing should be the cause first and the financial return second.
Once the market has developed more fully, has a track record which advisors can number crunch, and once the relationship between the availability of SITR, the cost of capital for organisations and the risk for clients is clearer, then this position may change.

Profit or purpose?
The big underlying issue for SITR is the separation and complementarity of profit and social impact. Paul Harrod is the founder of Bristol Together CIC, and he argues convincingly that the two goals, whilst being separate, can at least complement one another.

Bristol Together is a social enterprise partnership which employs ex-offenders on projects which aim to restore empty and unused properties in the area, which are then sold on at a profit. Harrod makes the point very well that the profit-generating nature of these projects is essential not only to the viability of the partnership, but also to its overarching aim of reducing reoffending. In his view, an extra sense of purpose and focus is created by its commercial goals.

There will always be a debate about how separate social impact and commerciality are, but Bristol Together is another good example of a successful project which has found a way to combine elements of both.

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