The minister for civil society has proposed the creation of a social investment ISA, and said pensions could be required to offer a social investment option, as part of his “vision for the future of social investment”.

Speaking at the launch of QBE’s Premiums 4 Good insurance product, Rob Wilson said he was beginning to think about further reforms “that will make it easier for people to be social investors”.

His proposals included a “dedicated social investment ISA to make social investing easily identifiable to mass market investors”.

Wilson said that an “ISA allowance that has characteristics specific to social investment would provide the impetus needed to get a meaningful range of socially themed products in front of investors from the general public”.

He said that this could be in the form of a “dedicated additional ISA allowance for social investments of say £1,000 to sit on top of the existing allowance”.

Wilson suggested the creation of a ‘social investor’ category “along the lines of the ‘restricted investor’ category in the crowd-funding space”.

He said that currently the cost of compliance with full FCA regulations can be “out of kilter” with the small scale financing needs of most social sector organisations.

He said that “a ‘social investor’ category, safeguarded with a maximum limit to each investment of say £250, would make it easier for ‘everyday’ investors to back local causes they care about, ranging from saving the local pub to sustainable energy production”.

Other proposals included requiring “pension providers to offer products to scheme members where a specified percentage of their money goes to social investments”.

He said: “It is something that we already see working successfully in the French pension system where billions of euros have been channelled to social impact investments.”

His final proposal is to update “the guidance and regulation around fiduciary duty to better account for social investment and non-financial concerns”.

Wilson said that the Law Commission has already set out recommendations around fiduciary duty and its “compatibility with environmental, social and governance factors”.

He said: “Broadly these say that fiduciary duty means considering both financial and non-financial factors. Or, put another way, fiduciaries are not doing their job correctly unless they are considering investments in the round.”

He said he wants to see these principles integrated into the investment strategies of investment managers. He added that these “doesn’t mean reduced financial returns, but “does mean considering how social impact can sustain or even enhance those returns”.

Wilson added: “75 per cent of millennials say that it is important that a company gives back to society instead of just making a profit - these are the kind of preferences that need to be better thought through by investors”.

Review mission-led businesses launched

The minister has also launched a review to increase the “economic and social impact of mission-led businesses in the UK economy”.

The review, led by the Cabinet Office, will examine how the mission-led business sector can be supported to grow over the next decade, looking at its potential for economic and social impact. The review will shortly issue a Call for Input and report by the end of 2016.