Ten reforms to grow the social investment market
Bircham Dyson Bell
This report sets out ten reforms to grow the social investment market in the UK:
1. A social investment duty should be placed on each of the Financial Conduct Authority and the Prudential Regulation Authority to encourage sensitive regulation.
2. The rules governing financial promotions should be reformed to take account of investors who invest with social or philanthropic motives, crowdfunding and peer-to-peer lending.
3. A specific authorisation regime should be introduced by the Financial Conduct Authority to facilitate crowdfunding, peer-to-peer lending and other online direct investment facilities.
4. The regulatory concept of ‘suitability’, which undergirds investment recommendations and discretionary management activity, should expressly include investors’ social goals.
5. A tax break should be introduced for social investment and community interest companies to level the investment playing field and encourage more social enterprise start-ups.
6. The law concerning the investment duties of charity trustees should be reformed to strengthen and expand the ability of charities to invest for social impact.
7. The law concerning the investment duties of pension fund trustees should be reformed to add to the ability of pension funds to consider environmental, social and governance factors.
8. Company law and co-operative law should be reformed to encourage the formation of more start-up companies with a social purpose and more new co-operatives.
9. A model social investment fund structure should be introduced to enable Government, charities and other investors to more easily invest in structured funds for social impact.
10. The registration of co-operatives and community benefit societies should be moved to Companies House and the CIC Regulator, to create a new Social Economy Commission.
Ten Reforms to Grow the Social Investment Market recommends to the Government that these reforms be introduced in a single item of legislation, such as a ‘Social Economy Enabling Act’.
A Social Economy Enabling Act with these ten reforms would enable and incentivise social investment and bring clarity to an area which, in regulatory terms, is fragmented and ill-defined.