A new report offers some valuable insights for co-operatives on the hunt for investors, which reveals that more than half the eligible population are interested in ‘positive investment’.
The study, from positive investment service Ethex, looks at attitudes towards forms of investment which bring social as well as financial returns, allowing money to ‘do good’.
It says there is “unmet demand” for such investment opportunities, which co-ops can take advantage of. The report, Understanding the Positive Investor, splits this demand into five categories:
The Well-informed (9.4 million) A relatively large group that are interested, engaged and see themselves as financially savvy. Confident in their financial capabilities, they believe in doing good through positive investment, and are aware of associated investment risk.
The Progressives (5.4 million) The highest proportion of those ‘very interested’ in positive investment and in exploring new ways in which to have a positive impact on society. They tend to have very strong opinions about their motivations and the benefits of positive investment.
The Receptive (1.6 million) Only 4% of the UK population and are the wealthiest of the five groups in terms of median total wealth. They are financially confident and are willing to spend time learning about positive investments – but they need convincing of the financial benefits.
The Unsure (3.6 million) While highly motivated to give back to society, and show the same level of interest in positive investments as the Receptive, they have low levels of wealth. They have a low level of financial confidence and feel they know little about positive investing, which tends to prevent them from becoming engaged. They only show strong interest in current and savings accounts, not in investment products.
The Sceptics (18 million) The largest group making up almost half the eligible population. Despite being the second most wealthy group, they have a very low level of interest in positive investment.
The research shows that the majority (19.5 million or 51%) of people are either already saving and investing positively or are interested in doing so.
To tap into this, Ethex recommends better education on social and financial benefits of positive investment; widening the net to attract less wealthy investors; paying more attention to younger investors; and focusing on local, social and simple projects.
It identifies the top 10 issues most likely to attract investors – which include many areas were co-ops are active or looking to expand.
- Improving health and social care
- Old age support
- Protecting the environment
- Generating renewable energy
- Social and affordable housing and homelessness
- Supporting community projects
- Improving opportunities and services for the disadvantaged
- Improving education services
- Sustainable agriculture and food production
- Improving access to employment or training
The co-op sector has been very active in raising positive investment, with community share offers ranging from the purchase of local assets such as pubs, venues and piers to renewable energy projects.
To boost such efforts, more education over the benefits of positive investment – in terms of social and financial returns – are crucial, the report says. Over a third (39%) of those surveyed did not know whether to expect a stronger or weaker financial return from positive investments when compared to traditional ones.
And 55% did not think they were wealthy enough to make positive investments. Organisations need to overcome this false impression, says Ethex, and a wider distribution network is also needed for positive investments, through established banks and building societies.
But in an encouraging sign for the future, younger generations are more enthusiastic. “Some of the trends are even stronger when focusing on those aged 40 and under compared with those aged over 50,” the report says. “This younger age group, therefore, provides opportunities for market growth.”
Co-ops looking for investors should also look for local, social and simple projects, the findings suggest. Positive investments that improve health and social care (31%) and old age support (26%) are most popular. The majority (58%) would also prefer positive investment to have an impact in their local area.
When it comes to saving, people want simpler, accessible positive investment products – with 44% expressing interest in taking out or switching to a positive savings account, 43% a current account and 40% an ISA.
Lisa Ashford, director and chief executive of Ethex, said: “Our research clearly demonstrates that interest in positive investment in the UK is high, with those under 40 particularly engaged. However, there is also much confusion and misunderstanding around investing positively. Providers have a lot of work to do in educating people, as well as meeting the growing demand for positive investment products.
“The research also demonstrates that although the importance of retail investors is often underestimated when it comes to driving change through positive investment, there is potential for this type of investor to have a much larger impact.
“For this to happen, providers need to open up the echo chamber beyond the relatively elite group they are currently communicating with and produce simpler products that tackle the issues people most care about, whilst providing investors with a financial return.
“With 19.5 million people either already investing positively or interested in doing so there is currently a real gap in the market. The traditional financial sector isn’t currently providing the products to meet the demand for positive investment.”
Ethex’s Understanding the Positive Investor report can be downloaded here.