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Big banks could do better on impact investment

Major financial houses failing to meet demand for dual bottom-line investments, says head of philanthropy at UBS

The global head of philanthropic advisory at UBS, the Swiss private bank, has said that major financial institutions are failing to meet demand for impact investment platforms from philanthropists and private foundations.

“Impact investing is a difficult proposition and we see a lot of demand that doesn’t translate into action,” said Silvia Bastante de Unverhau.

The need to measure social impact, on top of ensuring financial returns, requires a high level of active management and supervision, she added. And as funding levels in impact investing are typically small compared to conventional wholesale banking transactions, banks are shying away from impact investing operations that might tie up resources but make barely a mark on multitrillion-dollar balance sheets.

“A couple of funds at UBS over the last couple of years managed to raise $50m, which sounds like a huge amount of money but is in fact peanuts in an industry that works in the trillions,” she said. “One of those funds was for SMEs in sub-Saharan Africa, and to sell a product like that took so much work.

“A bank like UBS, and the majority of banks, are not set up to do relatively small investments, they’re set up for big products,” she added. “So there is in theory demand [for impact investment] but in reality there are not enough products, or at least the people who have the products cannot put them on the platform of the big banks.”

Some 205 investors invested $22.1bn into nearly 8,000 impact investments in 2016, and plan to increase capital invested by 17 per cent in 2017, according to a Global Impact Investing Network (GIIN) report released in May. While investment is growing, at an estimated $114bn market, it is still represents a fraction of all managed capital.

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