A new online platform that allows donors to recycle their charitable donations by buying social investment products, has launched.

SharedImpact, a registered charity, is the brainchild of Paul Cheng, who used to lead CAF Venturesome. It is an innovative mix of donations, social investment and online transactions.

Cheng describes SharedImpact as a global donor-advised fund. “We support people who have philanthropy capital. This is money which they want to give away. But they don’t want to use it as a one-off donation.”

A person makes a donation to SharedImpact and opens an account through which they can buy a social investment product listed on SharedImpact’s website.

Any returns from the social investment product are paid into their account, and the donor can redeploy the funds in a new social investment product.

SharedImpact charges a two per cent fee for each transaction.

“Although you’ve given your money away, you still have control over it and direct where it goes,” says Cheng. “It’s a way of making your charitable money work harder for social impact. It’s a simple but very powerful concept.”

Cheng adds that SharedImpact is unique as it offers a complete “end-to-end solution” for philanthropists: “We offer a range of social investment products and investment opportunities. It can also include grant opportunities.

“We offer convenience. On our platform you can allocate money from your account into a product. You press 'buy' and we manage all the complexity for you such as the gift aid, the paperwork, registering with HMRC. It will attract new people to the social investment market as I’ve seen people put off by the lack of convenience.

“As far as I can see we are the only platform offering our range of products where you can actually buy the stuff and it’s an actual transaction platform. A lot of other platforms are not transaction platforms, they are only information platforms.”

Unlocking social retail investment

Cheng also thinks his new service will help to dismantle the barriers to investment cited by the retail social investment market, such as high-price entry points for investors and onerous financial regulation on retail social investment products. Cheng believes he has the solution to both these issues.

“It can be about £50,000 to buy a social impact bond,” said Cheng. “That’s not a retail product if the minimum is £50,000. It is way too high. We have partnered with Triodos and we are looking at buying a social impact bond for £50,000 and breaking it into £1 chunks for our account-holders.”

Cheng added that as account-holders have made donations to SharedImpact, their social investment activity on its platform is exempt from financial regulation, as from the financial regulator’s point of view there is no expectation of a financial return.

Cheng said: “If you don’t deal with philanthropic money and you are trying what we are but under regulations, it is complicated and onerous. If you are offering a financial promotion to a retail investor that is the most highly regulated area of financial activity.”

SharedImpact currently has around 50 social investment products from around the world on its website. UK products include a charitable bond from Golden Lane Housing and an equity product from Oikocredit.

SharedImpact’s trustees vet the social impact of the organisations listed on its site. They look at a number of things such as the number of people reached by the organisation, how vulnerable the people are, and what would happen to the people if the organisation was not helping them. It also looks at the quality of the organisation’s social impact compared with a competitor.

Too much focus on financial returns

Cheng says social impact has a spectrum, calling it a “social return spectrum”:

“Some things are inherently more impactful than others,” he says. “For example you might have something in clean tech that is perfectly good, but in terms of social impact I think it’s wrong to try and compare its social impact with an organisation working with people with severe social disadvantage.

“There are different levels of social impact and the things we have to watch out for, as we grow as a sector and develop different types of platforms and different access points in the market, is to keep an eye on the depth of social impact we are creating in addition to the level of financial returns.

“I worry that at times the conversation is centred too much around financial returns and investors and not enough around social impact and beneficiaries.”

For more on platforms by which investors and donors can view or buy social investment products see this month's Charity Finance in-depth feature Exchange of Views.