Luke Davis, CEO at IW Capital, discusses the 2022 investment trends and why community investment is becoming increasingly popular
2021 saw several headlines in the world of investment, with major strides being made in markets such as cryptocurrency, mixed with social media-driven investment in companies such as GameStop, this past year was certainly a momentous year in the world of investing.
The pandemic has had an impact on the UK in ways that we could never have predicted, it has created a new class of investor, one more concerned with the impact their capital is having and the difference it makes to their local area. As we approach the end of the year, with markets recovering and showing an increased level of optimism due to positive news on the Omicron variant, the question is, what are the investment trends going to be in 2022 and how will it affect tech companies and start-ups?
ESG Investments on the rise
ESG investing saw substantial growth in 2021 and it seems to be ready to continue into 2022. The way investors make their decisions has changed permanently over the past few years and has no doubt been accelerated by the pandemic. Global ESG assets are on track to exceed $53 trillion by 2025, representing more than a third of the projected total assets under management, with Europe accounting for half of the current ESG assets.
Research from IW Capital supports this trend with it showing that 45% of investors are looking to back green or sustainable firms in 2022 and 42% of investors are looking to back firms that benefit their community.
This shows a clear sign of the increased desire to invest in tech companies and start-ups which investors will hold a personal connection with, being given the chance to visit their investment into their local community and feel valued when they attend.
Investing has never been more emotionally charged after a year where the social, environmental, and medicinal good of companies has been in sharp focus. Individuals now want to back companies that can prove they are beneficial to the local area, either through employment, redevelopment, or community outreach. This comes alongside what the firm is doing on climate change and carbon emissions which is, as ever, increasingly important.
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Growth of SMEs
It was a pivotal year for the Enterprise Investment Scheme also, with it being predicted to show equally impressive gains going into 2022. Since its inception in 1993, the Enterprise Investment Scheme has raised over £24 billion in funds for almost 33,000 companies. This trend continued into 2020 with a total of £1.9 billion of investment being raised by 4,215 companies.
With over 6 million SMEs in the UK, making up 99.9% of private sector businesses, EIS is an essential tool to accelerate the growth of the country’s SME landscape. Providing pivotal support to the backbone of the economy, if the EIS scheme were given greater muscle to assist start-ups and scale-ups to traverse the challenges posed by the post-Covid economic arena, it could provide a boost for the UK economy as a whole.
The EIS could also be an important trend throughout 2022. The EIS can be said to offer a win-win situation for both investors and small businesses – providing tech SMEs with much-needed investment to provide them with a platform to grow, whilst providing investors with tax reliefs to incentivise this investment.
Small tech businesses and SMEs throughout the UK have benefitted enormously from the EIS in the last 25 years, fuelling growth and job creation at an impressive scale. Tech SMEs are becoming so inventive and versatile with their companies and making sure they are at the forefront of the UK business scene. Tech SMEs are an indispensable part of the UK economy and the outlook for 2022 is extremely exciting.
Whilst there is still uncertainty in the investing world, along with obstacles caused by the Omicron variant, it seems the way investors are choosing their investment has changed and they are increasingly choosing investments which not only benefits their financial gain but also their local community and the environmental impact which their investment has. This seems to be here to stay heading into 2022.
Written by Luke Davis, CEO at IW Capital