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Social impact investment

Matthew Levine, Policy Manager at the IFoA, blogs about the IFoA’s work on social impact investment, including a recent webinar.

Matthew LevineIn 2018 the IFoA’s Policy team noted the UK Government’s increasing interest in social impact investment – as evidenced by the setting up of a Taskforce charged with studying this market and spotting opportunities to develop it. We engaged with the Taskforce and with other key stakeholders, and recruited members to form a new Social Impact Investment Working Party.  

We also had discussions with the Impact Investing Institute about their competency framework for social impact investing, and the IFoA plans to develop its own impact investment material for student actuaries.

On 19 March 2020 we delivered a webinar to introduce social impact investing both to members and non-actuaries. The webinar is chaired by Kudzai Chigiji, a member of the working party and the IFoA Finance and Investment Board.

In the webinar our speakers clarify often confusing terminology, describe key trends, and explore the ways in which actuaries can contribute in this field. The approach to these topics is thought provoking and practical, reflecting the presenters’ experience in international organisations such as the UN Development Programme and the International Labour Organisation.

In the first section Kurt Morriesen explains the difference between ESG investment, which is all about risk management, and social impact, which targets specific improvements to social or environmental factors. He also highlights the risk of ‘social impact washing’ – where companies design performance metrics that seem to target social impact, but in fact suit their own needs rather than the underlying social needs.

The speakers are agreed that the ‘spirit of the law’ is more important than the letter when assessing social impact investments. Investors should dig beneath the surface of what Key Performance Indicators are saying and should carry out thorough due diligence on potential investments.

People might assume that most social impact investment opportunities would be in small projects in developing countries, but this is challenged in the webinar. Indeed Kurt suggests that a large company based in a developed country could offer more opportunities for genuine impact, since improvements made in the company would flow through to its large and sophisticated supply chains.

How can actuaries use their specific skills and knowledge to contribute to the development of social impact investing? In previous discussions with stakeholders we noted technical opportunities, such as clarifying the methodology for analysing historic returns for social impact investments like social housing and infrastructure. However, the scope of contributions is actually much wider, as actuary Shilpi Nanda describes in the second part of the webinar. Shilpi discusses the innovation project she led with the public sector social health insurance scheme in Ghana, which created a digital renewals process and increased health insurance coverage in the population. On one hand, the project benefitted from her rigorous actuarial approach using modelling and the Actuarial Control Cycle; however, she also benefitted personally and professionally, developing her skills in new areas, such as the ability to deal with uncertainty and to be resourceful.

View the webinar

View the webinar and presentation slides on the finance and investment video page.