The Social Impact Investment Advisory Group’s recommendations aim to strengthen the partnership between government and impact investors.
A new report on how the UK government can work more effectively with partners to boost the impact economy recommended moving towards a system-wide approach to investment rather than working on a project-by-project basis, and suggested the creation of an Office for the Impact Economy within government.
The findings come from the Social Impact Investment Advisory Group (SIIAG), an advisory panel of experts set up earlier this year by the government to come up with proposals for the development of new social impact vehicles.
The panel included representatives from leading impact investing organisations including the Impact Investing Institute, Better Society Capital, Bridges Fund Management and the Esmée Fairbairn Foundation, as well as the Charities Aid Foundation, the Church Commissioners for England, and financial institutions Legal and General and Lloyds Banking, among others.
The UK’s impact economy already stewards £106bn (€120m) in assets, with at least £42bn of this existing capital currently aligned with government priorities, according to SIIAG.
Elizabeth Corley, the chair of SIIAG and also chair of Schroders, said the report drew on the expertise of numerous organisations working in the impact economy and showed that a partnership between the government and the impact economy could unlock billions of pounds more to help address some of the biggest challenges facing the country.
“Our report outlines the steps the government can take to work with the impact economy, to move from ad hoc projects to a system-wide partnership and deliver better outcomes and growth across the UK,” she said.
Boosting impact
The report identified a series of measures that would boost impact investment.
Public, private and philanthropic capital should be brought together using techniques such as match funding, blended finance and social outcomes partnerships, to deliver “practical, innovative solutions” to improve housing health and job quality, the authors said.
They recommended the creation of an Office for the Impact Economy to coordinate this action across government and provide a clear access route to the government for philanthropists, impact investors and businesses.
The report also outlined reforms that could be implemented to facilitate the flow of capital for social and environmental impact. These included clarifying fiduciary duties for pension schemes, modernising and legacy-giving rules and Gift Aid tax relief on charity donations, the integration of philanthropy and impact investment into wealth advice, and the provision of incentives to promote corporate purpose and giving.
The government welcomed the report, describing its findings as “a compelling vision” of how it could work with partners to deliver inclusive growth and unlock new sources of capital to improve people’s lives. It said it would “carefully consider” the recommendations and work to take them forward.
Shared goals
Kieron Boyle, chair of the Impact Investing Institute, said the report showed how government could build on the UK’s pioneering role in the sector by acting as a catalyst to bring business, investors and civil society together around shared goals.
“To meet the scale of the challenges ahead, we need to move from isolated innovation to a shared mobilisation of resources – aligning capital and capability behind shared priorities that matter to people, like inclusive local growth, better health and affordable housing,” he said.
SIIAG has already helped develop the Better Futures Fund, a £500m fund launched in July, to pay for social outcomes that improve conditions and create opportunities for vulnerable children and young people.
Robert Pollock, chief executive at Cambridge City Council, who was also part of SIIAG, said local authorities, as place leaders, should actively support the impact economy in their areas.
“The £500m Better Futures Fund is a great opportunity to co-design the type of place-based partnerships that put the voice of children and young people at their centre. I look forward to seeing many more such partnerships emerge between local and central government and the impact economy inspired by the recommendations in our report,” he said.
The UK’s cash-strapped government has collaborated with impact partners on several funding initiatives recently, as it seeks to mobilise more funding to meet social challenges, such as a housing shortage, homelessness and the need to support a creaking health service.
In June, the government confirmed it was allocating £87.5m to social investment in underserved places and communities as part of its latest allocation from the Dormant Assets Scheme, which allows UK banks and other financial institutions to pay money from dormant accounts into a special fund for redistribution.
The UK’s local government pension schemes, identified in the SIIAG report as a potentially significant source of funding, are also stepping up their interest in the social impact investments. A report sponsored by the pension schemes, published in September, outlined how they could produce investment strategies to support their local regional economies.
