The Editor’s Post: UK government finally brings impact investors in from the cold

Laura Joffre 18th October 2024

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Impact investing is back in favour among ministers desperate to use private investment to tackle the country's social crises – and the government is quick to frame the sector's achievements as its own. This week's view from the Pioneers Post newsroom.

It looks like the UK government is finally taking impact investing seriously again, after a very long hiatus. Labour politicians had been showing interest in the concept for a little while, and this week, the Treasury held its first meeting of ministers, impact investors and sector representatives to figure out how the government could help impact investing thrive – and tackle the big social issues that public authorities can’t afford to solve.

Chief secretary to the Treasury Darren Jones in particular seems to have taken real ownership of it – he called the meeting “my social impact investing roundtable” in a post on X. Also notable was culture secretary Lisa Nandy’s pledge to “make the UK a world-leading centre of excellence on the impact economy”: the impact sector seems to have excelled in the trick of coming up with a great idea and making politicians believe it was theirs all along.

Then of course the government’s spin machine jumped on the opportunity to announce half a billion pounds of investment into social and affordable housing, as if it was thanks to its own efforts. I’m sure the impact investors who have been working for months or years to raise this money for their housing funds deserve a bit of glory, too.

Lost in data – more numbers to unravel

As you may have noticed in Pioneers Post’s pages in recent weeks, autumn is the season for impact investing “market sizings” where organisations try to figure out how much capital is invested in impact in a certain country or region. This week, it was Spain’s turn, where impact investments reached €3.3bn at the end of 2023, according to a report published this week – make sure to read Julie Pybus’s article for all the detail.

These market sizings (stay tuned because a big one is coming up next week) are great tools, but beware comparisons. I was struck that Spain’s €3.3bn was dwarfed by the £77bn (€92bn) worth of impact investments in the UK, according to the Impact Investing Institute’s latest study. The UK’s GDP is about twice as big as Spain’s, and the UK impact investing market is much more mature – but still, that doesn’t really add up. On the other hand, another report, this time from Better Society Capital, estimated the value of social impact investments in the UK at £10bn.

The difference is simply due to how impact investing is defined by the researchers for each study, which often varies ever so slightly – but a small variation can change the entire scale of what we're looking at. To go back to the UK example, the difference in figures comes from the fact that Better Society Capital’s study does not include investments primarily targeting environmental outcomes, global investing from the UK, or impact investing into businesses that don’t explicitly define themselves as impact-driven – all of which are included in the Impact Investing Institute’s research.

For this reason, looking at trends and underlying data is often more important than looking at numbers. But the numbers can be useful, when it comes to demonstrate to, say, politicians, that impact investing is something to be taken seriously.