Social enterprises — companies which hope to have a social impact and at the same time make a profit — are becoming a new asset class for pioneer investors who are more ethically-minded, especially after the financial crisis.
"It is a golden opportunity to clean up the (financial) system and become more responsible,” Krishna Gopala, former senior executive in Philips Electronics and an active social entrepreneur, told CNBC.com.
But this type of investment is not for everyone, as businesses are driven by social and environmental objectives. They are not vehicles for building personal wealth because the bulk of their profits are reinvested into furthering social aims.
In the UK, there are more than 55,000 social enterprises, generating a turnover in excess of £27 billion ($44.8 billion) a year and contributing more than £8 billion ($13.2 billion) to annual GDP.
“It is not about investing in maximization of profit. It really is a mission-related investment where you can be achieving measured social impact and financial return,” said Nigel Kershaw, CEO of Big Issue Invest.
This is a subsidiary of The Big Issue, a social enterprise that began a magazine which offers homeless and vulnerably housed people the opportunity to earn a legitimate income.
Big Issue Invest is a specialized provider of finance for social enterprises and trading arms of charities, and any dividends made by the group are paid to The Big Issue.
As of November 15 2009, Big Issue Invest lent over £6 million ($10 million) through 32 loans and quasi-equity investments to 29 social enterprises. To date, Big Issue invest has experienced no write-offs.