As the urgency to address climate change intensifies, the UK’s tech sector is emerging as a powerful driver of green innovation.
But organisations aiming to develop impact technology can struggle to access funding through traditional routes, showing the need for alternative funding options.
Social impact investing typically funds projects tackling social issues, like climate change, but what is it, and how does it work?
What is Social Impact Investing?
Social impact investing has experienced notable growth in the UK’s tech sector in recent years – a sector that is key in enabling green innovation.
By the end of 2023, the UK’s impact investing market reached £76.8bn in assets under management, marking a 10% compound annual growth rate from 2020.
This form of investing, which is experiencing significant growth, places equal emphasis on tackling social issues as it does financial revenue.
This means that investors and investees are actively seeking to create measurable benefits for society on top of earning a profit from their investments. Essentially, any money gained is used to drive positive social changes.
The tech sector is one key area which has shown a notable interest in social impact investing recently. According to Gov.uk’s most recent data, at the end of 2022, there were nearly 1,200 ‘impact tech’ companies in the UK, collectively raising £3.12bn in funding.
Despite this, most funding into tech in the UK still focusses on capital return, as opposed to social impact. So, when social impact startups seek funding, the typical routes to finance can be more challenging. This is the scenario where social investment funds – like Key Fund – help massively.
They represent a broader network of social impact investors who are committed to backing ventures that deliver meaningful societal value, especially in areas underserved by conventional finance.
Since its foundation in 1999, Key Fund has invested in social enterprises in the health and social care, and educational sectors, as well as impact technology and, increasingly, green business.
The Importance of Social Impact Investing – A Case Study from Farm Urban
Social impact investment can enable the development of impact technology. This technology plays a crucial role in unlocking the full potential of social impact initiatives and sustainable businesses.
It’s this technology that enables businesses to implement real green practices while filling financial and employment gaps. It offers businesses a compelling corporate social responsibility (CSR) opportunity, too.
An example Key Fund has of investment in the world of impact technology and green innovation is its work with Farm Urban, a vertical hydroponic farming business.
Farm Urban aims to find healthier and more sustainable solutions to the broken food system. It’s co-founder, Dr Paul Myers, obtained a PhD in epigenetics – the study of how environmental factors affect one’s health and wellbeing through DNA – and noticed a lack of preventative approaches to the problem in the UK.
Alongside fellow co-founder, Dr Jens Thomas, he came across the ideas of aquaponics and hydroponics and was inspired to create Farm Urban, developing soil-less farming spaces in urban environments.
Farm Urban began by establishing three initial pillars of the business:
Greens for Good – growing fresh, healthy produce in a sustainable way, with 50% donated to food banks, and 50% sold.
FU: Labs – a science, tech and innovation arm undertaking research and developing grant-funded projects, often in partnership with universities.
Routes and Shoots – educational programmes designed to consider the most effective behavioural changes in fighting for sustainability, engaging all ages from primary school students to pensioners.
A vetted environmental partner of ‘1% for the Planet’, the international organisation whose members support not-for-profit and environmental causes by contributing 1% of their annual revenue, Farm Urban engages roughly 27,500 people each year and is exploring frameworks to measure impact on how to improve health, save carbon, and drive behavioural change.
Having garnered a strong regional reputation, Farm Urban was offered support from the public sector for major, long-term projects enabling its new concept, The Urban Oasis.
The Urban Oasis integrates all Farm Urban’s work into a single space, utilising assets such as car parks or shopping centres – the places that face challenges in becoming greener and attracting footfall. It will include the Greens for Good vertical farm, a café and community kitchen, urban allotments, smart beehives, education spaces, and maker spaces.
Projects like this highlight an exciting opportunity to offset the embodied carbon in our cities, using the spaces that already exist in concrete jungles to grow food in an energy efficient, sustainable way, reducing the need for heavy transport and saving green spaces.
Unlocking a Financial Padlock
Having geared up its team to deliver the work on multiple Urban Oasis projects, the public sector contracts were heavily delayed and didn’t materialise as expected, leaving Farm Urban in a precarious financial position.
This is where – aware of the significance of these projects – Key Fund stepped in to help, investing £150,000 of flexible finance funding. This was critical funding that Farm Urban was unable to access through traditional routes.
The investment ensured Farm Urban was able to continue its operations and now, the business has a strong pipeline and is on track for a £750,000 turnover.
A mini version of The Urban Oasis is now set to be delivered in Scotland, with further discussions underway with organisations in London and Birmingham.
In addition to providing monetary investment, Key Fund has worked with the Farm Urban team to make them aware of other funding opportunities and provide wider business support too.
This case is a perfect example of the importance of social impact investment, as without it these potentially transformational projects, with innovative tech at their heart, would never have been possible.
Why It All Matters
Funders, like Key Fund, emphasise social impact investment and enable green innovations without the constraints of traditional financial pressures – those which are usually imposed instantly by conventional funders.
There has never been a more significant time for the business world to look beyond profit. Instead, we hope that more investment looks to support innovative initiatives, like Farm Urban, and helps them to access the important funding they need.
Social impact investment, if we prioritise it, will unlock technology that could have an immense impact on communities. Without it, important innovations will be overlooked and incredible opportunities missed.