The idea that investment can be a positive force for societal change is hardly a new one, but a rise in the scale and scope of mission-aligned capital creates a need for further clarity and a more nuanced understanding of the market by segment. The UK National Advisory Board has committed to develop a clear and accessible mapping of the landscape along with a proposed direction of travel to promote awareness and understanding. Access our findings in Resources

The Spectrum of Capital

The 'Spectrum of Capital' is an attempt to map out the broad range of risk/return strategies that exist within sustainable and impact investing – and to explain how that relates to the capital markets more generally. Bridges Fund Management’ thesis is that these categories fit into a broader spectrum of capital, ranging from traditional investment on the one hand to philanthropy on the other – and that along this spectrum there are a number of different strategies for investors to adopt, depending on their desired risk, return and impact profile. 

By understanding this spectrum of capital, it is possible to design different investment strategies to promote entrepreneurial solutions to societal challenges. As the dotted lines along the spectrum reflect, these categories are not mutually exclusive; often they are interdependent, with many investors or businesses operating between or across categories

Source: The Bridges Spectrum of Capital (November, 2015)  

Responsible investments

Responsible investments range from those that ‘negatively screen’ for ESG risks, to those which actively work to mitigate them during ownership.


Sustainable investments

Sustainable investments take this further by deeply integrating social and environmental factors into investment analysis and proactively looking for ESG opportunities, selecting companies that investors believe will outperform the market because they operate (or have the potential to operate) in a more sustainable way than their peers over time – be it through their environmental management, stakeholder engagement or governance practices. We distinguish this from “Responsible Investing” because it focuses not just on protecting value against risk but on creating additional value through both investment selection and portfolio management.



Impact investments go beyond this to focus on solutions to pressing societal or environmental issues. Impact investments focus on one or a cluster of issues, with a deliberate intention to make a positive social or environmental impact. 

Some focus on societal or environmental solutions that can generate market-rate (or market-beating) financial returns. For these investors, there are a growing number of for-profit businesses that help to address a societal or environmental issue through their core product or the place in which they are located. Others are willing to make investments whose impact thesis may or may not deliver a market-rate financial return – social impact bonds, for example, may produce attractive returns but the product is not yet proven. A third category includes those who are willing to make investments whose impact approach requires a trade-off of financial return and therefore deliver a below-market financial return. This could, for example, involve backing social business models that re-invest some or all their financial surpluses, such as trading charities, mission-driven cooperatives or cross-subsidy models. All three types of investment intend to create positive change in response to social or environmental issues, and so all are impact investments


Impact-only investments

Impact-only investments are those with an impact-only motivation, where investors are willing to forgo principal through philanthropy. These funders continue to play a critical role in in tackling pressing social or environmental issues where commercially viable solutions are not available.