While a large portion of UK impact investing is carried out by institutional investors (hedge funds, private foundations, banks, pension funds, and other fund managers), there are well-established web-based investment platforms that offer individuals an opportunity to invest directly in products that benefit organisations, creating positive impacts. The main products offered by these platforms offer an alternative way to invest directly to align your money with your values, differing from that of traditional wealth management. Some typical vehicles in impact investment that you may come across include: * Community Shares * Ethical Bonds * Innovative Finance ISAs (IF ISAs) * Equity Investments in Impact-Focused Companies Broadly speaking, common traits among impact investment vehicles are that they tend to have longer terms, higher risk, and variable liquidity. Whether you’re funding a local community project, lending to ethical businesses, or investing in sustainability-focused companies, these options provide the opportunity to make a difference while potentially earning decent financial returns.

The first driver is simple in some ways. Climate change, social inequality, and biodiversity loss have created urgent needs that traditional funding sources can’t address alone. This represents a huge opportunity, which leads to the second driver, client demand: as the “Great Wealth Transfer” unfolds—with approximately £5.5 trillion transferring between generations in the UK over the next 30 years—younger investors are increasingly aligning their investments with their values, and firms are seeing this opportunity to tap into changing and growing client demand, offering products and services suitable for many different types of investors. And thirdly is thanks to the government’s response to these changes: Regulators and policymakers are looking to address the UK Financial Conduct Authority’s Sustainability Disclosure Requirements regime, which includes impact-focused labels for retail investments, has brought greater clarity and credibility to the market. The new regime was set up to counteract some of the fears around impact washing and green washing, or in simpler terms, ensuring that investment products actually do what they say on the tin.

As the word ‘direct’ implies, direct impact investing cuts out the middleman. Direct impact investments can be considered part of a balanced, purposeful investment strategy, alongside investing in public equities or funds with an ethical or green focus, or working with a wealth manager or adviser, as discussed previously. It offers several benefits: tangible impact, diversification, alignment with values, participation in something big. Platforms aim to connect investors directly with enterprises working at a grassroots level to address some of our most pressing social and environmental challenges. They have seen firsthand how community-driven energy projects, social enterprises, and ethical businesses can thrive when backed by investors who refuse to accept that progress must slow down. The investment opportunities can range from community renewable energy projects and social enterprises to profit-for-purpose businesses and sustainable agriculture initiatives. Another option to align your money with your values is to invest directly in impact startups as an angel investor. Angel investments make up 50% of visible funding for early-stage companies in Europe*. By putting even small amounts of money towards validating and scaling environmental and/or social solutions at the very early stages, angel investors have a significant say in which solutions get off the ground. *European Business Angels Network, Angel Invetment Market Highlights 2023. Retrieved from https://www.eban.org/eban-annual-statistics-compendium-for-2023/

Impact investing is rooted in the premise of creating positive change alongside returns, but good intentions alone aren’t always enough. Intentionality goes further, providing a framework for ensuring impact is not only pursued but also measured and accountable. Intentionality comes into play when impact investing is central to how you manage your wealth. The Impact Investing Institute defines intentionality for investors as “an impact investor’s deliberate goal is to contribute to specific positive and measurable social or environmental outcomes.” Intentions alone may not be enough to ensure your goals are met. That’s where intentionality can be a useful practice. It helps you move from passive impact investing to a more accountable process for you and your fund managers. So, what are some ways for you to practice intentionality? - Always lead with your values and ensure they are communicated and understood. - Be clear about your impact goals before choosing investments - be ready to convey them confidently. - Actively seek sector or domain expertise - over time, you may also develop some of your own. Leverage your own professional experience, especially if it aligns with your impact goals - use those transferable skills to enhance your investment strategy and to evaluate its outcomes. - Question expertise by asking curious or discerning questions, and don’t be afraid to ask questions like “is the impact verifiable?”, and if so, “how is this impact being measured?” - Be receptive to talking about and understanding any negative impacts or trade-offs. Factor those into your investments and look for/discuss ways to mitigate them or pivot away. - Stay engaged after the investment. Think about other ways you can help, like sharing industry contacts or offering extra resources. - Consider externalities (or any factors) that may affect your impact goals, not just negatively but also positively, and be ready to course correct.