Social Investments: a good long-term home for your liquid cash or risk capital
By Monica Middleton & Kawien Ziedses des Plantes
Posted: 8th May 2015 14:32In 2015, cooperative Oikocredit celebrates its 40th anniversary as one of the world’s leading private social investors. Reporting another year of solid results from its headquarters in the Netherlands, Oikocredit Managing Director, David Woods, says: “in the next five years we see ourselves as being the most socially responsible impact investor in the world, with a true mix of social, environmental and financial goals”.
Investing with a conscience is on the up
Over the past few years, the UK has seen unprecedented growth rates in social investing; estimated at 20% year-on-year for retail investors and 250% for institutional investors. Much of this is attributed to the UK Government’s introduction of a social investment tax relief (SITR); changes in financial regulations; and significant product innovation – paving the way for easier access to a wider choice of products in the UK. Recent popularity is also undoubtedly due to a rise in social consciousness in this era of so-called conscious capitalism – namely, universal recognition of the social and environmental challenges we face as a civilisation, and the impetus for many of us to consider our purchasing choices more carefully.
Those who have joined the UK social investment movement include organisations of all shapes and sizes – corporates, trusts, pension funds, charities, family offices, endowment funds, faith-based institutions, social enterprises and SMEs. Growth is also driven by individual investors – high net worth individuals, sophisticated investors and everyday savers. What unites them all is their wish to adopt a simple, meaningful way to contribute to positive change whilst finding a worthwhile, medium-to-long term home for their investable capital or risk capital.
Succinctly put by Clare Jones of ClearlySo: “Social investing means considering risk, return and impact when making investment decisions, and choosing to invest in companies that are actively creating positive social or environmental impacts [for example, poverty or climate change alleviation]. It is a step further than divesting from negative impacts (for example, moving your investment portfolio away from fossil fuels or armament investments); it means using your money to consciously tackle society’s challenges – and to make a financial return.”
Becoming a broader, better understood and more accessible investment sector
Whichever social and environmental challenges resonate with investors, there are no shortage of innovative products in the UK – from shares, bonds and savings accounts to debentures, depository receipts and ISAs.
The market can be further divided into organisations that focus their social missions on international development – for example, Oikocredit, Shared Interest and Triodos. And those that focus exclusively on improving conditions affecting UK communities – for example, Allia, Big Issue Invest, Charity Bank, Ecology Building Society and Resonance. Oikocredit, for instance, offers withdrawable depository receipts where investors’ capital is spread across fair trade, microfinance, agricultural and renewable energy partners to alleviate poverty in developing countries.
Most social investment products are also promoted by specialist UK intermediaries and portals such as ClearlySo, Ethex, Gaeia, Investing Ethically and Microgenius; as well as social investor networks such as GABV, GIIN, ECCR, EUROSIF, INAISE and UKSIF.
Oikocredit – A 40-year track record for deploying investors’ capital in social investments
Social investing might only just be starting to take off in the UK, but it has a long history. Some of the earliest known pioneers were philanthropists, intent on helping people into trade and out of poverty and reliance on charity. During the 20th Century many social investors were faith-based organisations, innovating to expand their social missions.
Such were the beginnings of Oikocredit, born amidst the political unrest of the 1970s. The cooperative was initiated by the World Council of Churches who wanted a socially responsible investment channel that would enable organisations and individuals to invest their money for positive development – an idea that was radical for its time. From these early roots, Oikocredit has become one of the oldest and largest sources of social investment in the world, although it remains a relatively young operation in the UK and Ireland.
Today, Oikocredit dedicates itself to providing wide-ranging financial and technical support for improving the livelihoods of people and communities in developing countries. Oikocredit lends to more than 800 partner organisations in over 60 countries. Its mission is to reach financially-excluded people; and support them in building their own businesses and sustaining their families and communities. In 2014, 28 million people were reached by Oikocredit’s fair trade, social enterprise, microfinance and renewable energy partners. Its UK partners include leading Fairtrade brands Divine Chocolate, Cafédirect, People Tree and Twin Trading.
Oikocredit Director, Albert Hofsink, who retires in 2015 after 20 years with the cooperative, summarises this rapidly changing landscape for social investment and Oikocredit as being particularly noticeable over the past 10 years. He says of the shift: “from then on we went from being a pioneer that was founded by the World Council of Churches to a larger organisation with a social approach.” Indeed, over its 40 year history Oikocredit has disbursed over € 2.1 billion of development financing raised from investors – over half being disbursed in the last five years.
In 2014, Oikocredit continued to deliver to its strengths whilst diversifying into new areas of social investment such as renewable energy, and reaching ever more remote communities and women. For the year ending 2014, Oikocredit reported €907m of assets under management and its 53,000 worldwide organisational and individual investors generated a development finance portfolio worth €735m.
Investing in the Oikocredit International Share Foundation (OISF)
To mobilise the funds needed for its mission of providing finance and other support to disadvantaged people, the Oikocredit cooperative issues shares to its members. One of its members, the Oikocredit International Share Foundation (OISF), also provides an investment opportunity for non-members by issuing depository receipts for Oikocredit shares. When you invest in Oikocredit you acquire these depository receipts, which are a social investment product and have historically generated an annual gross dividend whilst creating a positive social impact.
Specifically, Oikocredit has delivered a 2% gross dividend to its investors each year, every year since 2000*. There is no maximum investment; no fixed notice period; no annual management charge, commissions, fees or other charges; and investors have always had their capital repaid.
Investing is open to both organisational investors and individuals, and is particularly suitable if you are looking to deploy liquid or long-term risk capital into social investments and/or meet objectives of corporate social responsibility (CSR).
More information about investing can be obtained from Oikocredit UK and Ireland, or from one of their other offices in the US, Canada, Germany, the Netherlands, Austria, Switzerland, France, Spain, Italy, Belgium and Sweden.
Capital at Risk
Your investment is at risk. It is not covered by a Financial Compensation Scheme and is potentially illiquid. If you are in doubt about the suitability of this investment, contact a financial expert. *Taken from Oikocredit Annual Reports & Accounts, but past performance is not a guide to future performance and repayment of your investment is not guaranteed.
The OISF prospectus is approved by the AFM, the regulatory authority for financial services in the Netherlands. The AFM has notified the FCA, the regulatory authority for financial services in the UK.
Monica Middleton is Oikocredit’s National Director of UK and Ireland. Her focus is to enhance the profile of Oikocredit in the UK and Ireland, and to raise investment capital from organisational and individual investors looking to help tackle society’s challenges.
www.oikocredit.org.uk∕ +44 (0) 1995 602 806 ∕ firstname.lastname@example.org
Kawien Ziedses des Plantes is Head of the Oikocredit International communications unit. Her focus is to increase awareness for Oikocredit’s development finance ‘plus’ approach and economic development for the common good.
www.oikocredit.coop∕ +31 (0) 62 725 49 04 ∕ email@example.com
(1)Ethex 2014; UK Cabinet Office/SIIT 2014; Big Society Capital 2014
(2)Aburdene, P. Megatrends: The rise of conscious capitalism
(3)City of London Economic Development, April 2014
(4)Ethex 2014; Nesta 2011, UK Cabinet Office/SIIT 2014; the World Economic Forum 2014.