Guest blog from Dr Yvonne Gale, CEO of NEL Fund Managers, as published by the Institute of Economic Development
I recently attended the IED’s inaugural CPD workshop on inclusive growth where one of the delegates and I had a discussion about the recent independent advisory board report on Growing A Culture of Social Impact Investing in the UK.
This report forms part of a growing body of work on impact investing defined by the Global Impact Investing Network (GIIN) as “investments made with the intention to generate a social and environment impact alongside a financial return”.
The advisory board report focuses on the current state of impact investing in the UK compared to other countries and recommends improvements to the UK financial services system and regulatory environment.
The report is, in many ways, excellent and long overdue. However, as CEO of an impact investment fund manager formed long before the term was coined, a glaring omission to the report struck me: it does not include any learnings or best practice from the use of impact investing in regional economic development.
Using financial instruments to address market gaps in access to finance as a tool in economic development is well established. Our own firm has decades of experience of funds where success is measured in financial and social outputs for customers spanning all forms of central and local government.
The voices of these customers were absent from the report. This is a limitation of the report but more importantly a sad indication of innovative work in economic development not being recognised for its power to change the wider picture.
The report discusses how to measure impact consistently yet financial instruments such as the North East Fund or Midlands Engine Investment Fund have clear and well-established deliverables required from fund managers.
Similarly, the report asks how to reduce barriers for pension fund trustees, yet local government pension funds are already versed in addressing these issues. As early as 1993, we at NEL Fund Managers worked with local government pension funds on impact investing. I had the pleasure of working with the Northern Ireland Local Government Officers Superannuation Committee (NILGOSC) supporting delivery by Whiterock Capital Partners on a recent £50m fund. NILGOSC completely understood how to meet their pensioners financial needs and address local economic and social needs through impact investing at scale and radically changing the access to finance landscape of Northern Ireland. Nowhere in the report does this trailblazing work feature.
Finally, there are recommendations for the Financial Conduct Authority (FCA) to educate the financial advisors on impact investing and its benefits for their clients and the wider society. I was ready to say that economic development professionals yet again lead in their approach to professionalisation through continued professional development, until I realised that was not wholly true.
The place of financial instruments backed by government is well appreciated as an economic development tool, but training and CPD opportunities are very rare. Our own firm conducts internal training for our team, yet such opportunities should be developed for the profession as a whole. The FCA should then be invited to see how professionally this work is conducted so they can transfer knowledge built on experience to the wider financial services industry.
Having attended several conferences on impact investing I have been repeatedly surprised by how little knowledge there is within the financial services industry on assessing impact investment proposals, measure impact, report progress etc.
Conference attendees seem to be answering all these questions from scratch when there are easily transferable approaches used every day in economic development impact investing funds.
We are hiding our impact investing expertise and need to show the world that economic development professionals are already highly knowledgeable and experienced in delivering economic and social change through impact investing.