2018: The Rise of the Conscious Investor

22nd January 2018

In the 25 years since Michael Portillo – the then Chief Secretary to the Treasury – introduced the Enterprise Investment Scheme, the institution has since raised a total of £16.2bn for over 26,000 small and medium-sized enterprises. By allowing companies to raise up to £5m a year – capped at a total of £12m in a company’s lifetime – the EIS and SEIS has emerged as vital platforms of growth-finance for the UK’s start-up and scale-up entities. At the time of its launch, the introduction of the EIS represented another step forward in the UK’s fast-evolving SME investment landscape. Having started life as the Business Start-Up Scheme, the initiative then evolved into the Business Expansion Scheme before finally settling as the Enterprise Investment Scheme. Far from its final iteration, the Government has continued to alter and adjust how EIS is structured to help channel investment where it is most needed; most recently evidenced in the 2017 doubling of the investment cap for “knowledge-intensive” companies – as announced in the Autumn Budget.

It is not, however, just the methods of investment that have evolved over time. As the world witnesses an upsurge in tech-innovation, and the accompanying rise of new-age sectors that propel this trajectory, investors are now, equally more motivated by a greater range of ambitions than traditional influences of purely a solid return. As Russell Roberts, of the US-based George Mason University, noted only ten years ago, many investors were seen as “merely playing with other people’s money” and ignoring the moral dimension of their actions. Increasingly, however, investors are making investment decisions based not just on a lucrative financial agenda, but by environmental, ethical and societal concerns.

This increasingly conscious community  is looking at fledgling biotech disruptors, innovative fintech solutions and revolutionary med-tech scale-ups as a way of using their wealth to influence the world around them. While this approach to investment has long been presumed to carry with it a higher-risk association  (given the un-ventured sectoral space they exist within) the attitudinal reality of the 2018 investor is beginning to suggest differently. UBS, the global financial services company, noted at the end of last year that the average return of the MSCI KLD 400 Social Index, which tracks sustainable firms, matched the S&P 500 based on the UBS risk and return criteria.

Next week IW Capital will be quantifying this shift further with the release of their new report – The Vested Investors Report 2018. The nationally representative body of data will evaluate whether investors in the UK are mirroring the same evolving set of investment aspirations as apparent in the United States, and whether the rise of the UK’s unparalleled suite of emerging tech sectors will continue to influence national investment agendas for the year ahead. See this and future reports by joining IWC’s exclusive community – Access 42 – here.