A record 1.85 million people across the UK have now saved and invested £3.6 billion in businesses that create positive change, according to Ethex’s 2015 report, released this week to coincide with Good Money Week. We found positive savings and investments – in credit unions, ethical banks, community shares and businesses with a strong social or environmental mission – grew 11% over the last year. That’s more than four times faster than the 2.4% average growth of UK household savings and investments over the last five years reported by Lloyds Banking Group.
Our report also looked at the most active hotspots in the UK for positive investing. This year, Bath came out top, up from third place last year, raising £5.3 million into six community share offers with Lancaster and the Lake District second, raising £5.1 million in four offers. Oxfordshire was third raising £3.9 million and Bristol, home of Triodos, came a close fourth, raising £3.6 million. Nationally, in the last year £36 million was raised in direct investment into 75 community share offers across the UK.
The report demonstrates that positive investment can deliver strong social and environmental benefits to society at little or no cost to the taxpayer, and the demand for it is there. For example a recent survey by Barclays Bank found that while only 9% of investors had made impact investments, 56% were interested in doing so. But to unlock this potential, there is much work still to be done on improving the choice and quality of positive savings and investment products. These offer some exciting opportunities for those willing to take up the challenge!
Firstly, some 96% of the UK population have a bank account. And for the younger generation, choosing a bank account is likely to be one of their first financial decisions. One million people switch account each year, so positive bank accounts have huge potential to attract ethical savers. Currently, choice is limited, but Triodos Bank intends to offer positive current accounts in 2017, filling a gap that emerged after the Co-operative Bank ran into difficulties.
In the UK, 34% of adults over 16 contribute to a pension, and yet there are almost no positive options available. France offers an interesting model. Since 2001, employers and pension providers have had to offer employees the option of investing their pensions in the Solidarity Investment Fund, which channels 10% of its assets into social investment. The fund now stands at 4.6 billion euros with over a million investors. A similar requirement in the UK could channel hundreds of millions of pounds into positive investment.
Thirdly, a promising development is the emergence of genuinely positive funds, such as Impax Environmental Markets, the WHEB Sustainability Fund and the Threadneedle UK Social Bond Fund, There are already around 100 ‘ethical’ funds that screen out undesirable investments such as in armaments or tobacco. Positive funds are different because they screen in, choosing to make investments that deliver positive social and environmental benefits. They also report on their impact, allowing the investor to see what the fund has achieved.
If we get the products right, the scope for growth in the positive saving and investment market could be huge. Currently, the total amount saved or invested positively represents only 0.2% of financial wealth and reaches 2.9% of the population. On average, each person is saving and investing less than 10% of their wealth positively. We estimate that over the next five years, positive investing and saving could comfortably grow to reach 6% of the population or 3.8 million people, with each person positively saving and investing on average 20% of their financial wealth. This would take the total market size to £11 billion by 2020, and with that more it into the mainstream.
There is a growing movement of positive investors who choose to use their savings to tackle social and environmental problems. We would like to see a financial system that guides and supports them in their choices. We believe that platforms like Ethex are helping to make this vision a reality.
words: Jamie Hartzell
Jamie Hartzell is a long term social entrepreneur. His latest venture is Ethex, a not-for-profit investment platform making it easy for individuals to make positive investments, and now acts as chair. He is also chair of leading social enterprises Divine Chocolate and Zaytoun. He founded The Ethical Property Company in 1998 and grew it to be one of the UK’s leading social businesses providing affordable workspace to charities and social enterprises, and set up sister companies in France and Belgium. Previously he was a documentary film-maker working on environment and development issues with the BBC and Channel 4 leading to extensive travel across Africa, Asia and Latin America.
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