Expect wealthy clients not only to ask about investing in companies whose processes are green and socially responsible, but also about companies whose very missions provide an environmental or social return in addition to a financial profit. For advisors who want to get up to speed on “mission-related investing,” aka “impact investing,” the first step is to learn about what’s happening—and the opportunities offered—across the pond.

The United Kingdom is showing what’s possible in mission-related investing. Two years ago, the government established a cabinet level position called the Office of the Third Sector, with a broad mandate to improve the environment for social investing. The "third sector" is the term for hybrid enterprises combining for-profit and charitable missions.

One of the most interesting recent developments in this sector is an effort to launch a “social stock exchange,” where mission-oriented companies can raise money from investors interested in ensuring they're doing good even as they profit.

The term "impact investing" can have different meanings to different people. But the bottom line generally is that the goal goes beyond “negative screening” for investments, that is to say, making sure a portfolio doesn’t include companies that do bad things. Getting rid of stock in companies that support apartheid is so 1980s. Investor consciousness has since evolved. Now, many want to put their money in firms that have a stated, constructive mission to save the world in some way—by doing anything from selling environmentally friendly products to building affordable housing.

Thinking Big

There’s a steady, growing mission-related investing movement in the United States. But the United Kingdom is trying to innovate on a grand scale. The social stock exchange is being developed by Pradeep Jethi, a former new product development manager on the London Stock Exchange and Mark Campanale, a long-time expert in socially responsible investing for institutional investors.

The goal of the exchange is to address probably the biggest problem facing social enterprises: Once they start to grow, their alternatives for raising money are limited. “We believe the one thing that blocks these enterprises when they get into the mid-stage of their life cycle is just where to go for their next capital expansion,” says Jethi.

Because mission-related companies have two, and sometimes three, purposes—financial, environmental and social—they tend not to be as profitable as traditional businesses. If acquired, the companies take the chance that their new owners won’t continue to concentrate on the social mission, choosing instead to make changes likely to increase profitability. Similarly, if these companies go public, shareholders will demand that compromises be made in the mission. For example, a company devoted to manufacturing its product locally might be forced to outsource production to China.

That’s where the social stock exchange comes in. The only companies listed are to be double- or triple-bottom line enterprises. Investors would be buying into a commitment that these companies will not dilute their missions to turn a bigger profit. “These investors would want to see a social return,” says Jethi. “They wouldn’t focus just on profit maximization.”