Increase diversity and close funding gaps to boost London’s impact investment sector

London’s impact investing sector can grow by increasing its diversity and filling current gaps in the market, according to new research from independent think tank Centre for London.

Researchers spoke to people across the impact investing industry. They heard that some ethnic minority-led projects were struggling to access investment due to lack of networks and cultural biases.

To grow the sector, researchers found that asset managers should focus on existing gaps in market: early to mid-stage SME (Small and Medium Enterprise) projects seeking £100-300k and blended finance options for projects with deep impact but limited scalability.

The report calls on local leaders to support the sector by helping to connect the right type of capital with the right project at the right time.

The research explored how to maximise the local benefits of impact investment capital – with five key recommendations on how to support and boost the sector:

• Make access to capital more inclusive: Create funds for minority led projects and champion diversity in the sector.
• Reflect real needs: Asset managers should ask organisations applying for funding to demonstrate that it’s what the people who benefit want and need.
• Fill gaps in the market: Expand funding for early to mid-stage SME projects seeking £100-300k and blended finance options for projects with deep impact but limited scalability.
• Build connections and community: To help connect the right type of capital with the right project at the right time, the Greater London Authority (GLA) should provide a forum for investors.
• Talk clearly about aims and impacts: To reach more people, the impact investing sector needs to speak the same language. It should work on using common definitions of goals and measurements of impact.

Josh Cottell, Research Manager at Centre for London, said:

“The impact investing sector is a London success story. But to grow further and benefit the city more, the sector needs to change.

We hope these findings are a wake-up call on taking diversity and public participation seriously.

With the right support from local and national government, impact investing can make a huge difference as we face the prospect of further austerity.”

The research was supported by City Bridge Trust – the City of London Corporation’s charity funder – and Sir Harvey McGrath.

City Bridge Trust Chairman Giles Shilson said:

“Alongside public investment and philanthropy, private investment capital is an increasingly significant force in forging a London that works for all.

“As this research shows, deploying investment finance is an ever more important way of delivering social impact, one which will help us fulfil our role in bridging the divides that have, for too long, held Londoners back.”