Impact Investment: What is it, why Nesta?

Nesta is involved in impact investment because of its growing importance in financing social innovations so that they can grow and maximise their impact.

Our definition of impact investment is:

Impact investment is investment with the primary goal of achieving positive outcomes for individuals, communities or society as a whole, and with a secondary goal of achieving financial returns for investors.

Investment is needed to fund the creation of new innovations, to support their development and testing and to scale up those innovations that work. This is as true of innovationthat seek to achieve social impact as it is of those motivated by creating financial value.

There is also growing experimentation around the world with innovations in financial mechanisms as a means of supporting the improvement of social outcomes. The UK has been a pioneer of innovations in finance for impact, for example in the development of Social Impact Bonds as a structured finance product for social impact.

Nesta's work on impact investment includes:

• Launching an impact investment fund for high potential early stage social innovations through our fund management subsidiary Nesta Investment Management.
• Investing to create new impact investment funds and products such as Bridges Ventures Social Entrepreneurs Fund or Big Issue Invest's Social Enterprise Investment Fund.
• Funding the strengthening of social venture intermediaries who provide incubation, business support or corporate finance advice to innovative social ventures, such as Shaftesbury Partnership, Bethnal Green Ventures or Resonance.
• Researching major issues in the development of the market for example the demand for impact investment, the interest in the field amongst individual investors and their advisors, and the regulatory barriers to impact investment
• Working with practitioners to develop and test evidence standards for impact investment, an approach embedded within our fund

Our aim, through this work, is to support the development of the impact investment market. In particular we want to see more investment focused on: 

• inclusive, accessible, affordable innovations that address major social needs;
• delivering positive social outcomes regardless of legal form;
• the standard of evidence of a venture's impact;
• profitable, sustainable and resilient business models capable of scaling their impact.