UK Social Investment Worth £1.5B

Independent financial institution, Big Society Capital, has produced the first estimate of the size and composition of social investment in the UK, putting its value at £1.5 billion (A$2.8 billion).

The Big Society Capital report showed that there were nearly 3,500 different social investments outstanding at the end of 2015, and it estimated that at least 3,000 different charities and social enterprises currently benefit from social investment.

The report found that more than two-thirds (70 per cent) of social investment is channelled to charities and social enterprises with some kind of asset lock. The rest of social investment (30 per cent) is focused on social enterprises and profit-with-purpose companies without an asset lock.

The report defined social investment as: “The use of repayable finance to achieve a social as well as a financial return.” It added: “Social investment requires both the investor and the user/investee to explicitly intend to create a positive social impact.”

It also estimated the size of wider forms of impact investment, in which either the investor or the user/investee, but not both, is socially motivated. Big Society Capital estimated that investor-led impact investment in the UK is worth at least £3.2 billion (A$6 billion) and investee-led impact investment, which includes all housing association debt, is at least £68 billion (A$127 billion).

“Higher-risk products are now a significant part of overall social investment,” the outgoing Head of Strategy at Big Society Capital and the report’s author, Matt Robinson, said.

“We believe that social investment in the UK is now helping thousands of charities and social enterprises. We are seeing a diverse range of different investment products, with quite significant growth in higher-risk forms of capital such as unsecured loans, community shares and charity bonds.”

He said social bank loans to asset-locked organisations are still the single most prevalent product, but products such as social property funds (9 per cent), unsecured loans (10 per cent), community shares (6 per cent), charity bonds (6 per cent), and equity-like products (2 per cent) have emerged strongly in recent years.

“Social investment deal-flow in the 2015 calendar year saw around £427 million (A$797 million) of deals offered to about 700 charities and social enterprises. It appears that deal-flow has more than doubled in value since 2011, representing roughly a 20 per cent annual growth rate.  A lot of the growth in deal-flow has come via higher risk products,” Robinson said.

“This research also shows that social investment deal-flow is growing, and is more than double the level of five years ago.”

Big Society Capital’s new Chief Executive Officer, Cliff Prior, said: “Big Society Capital’s job is to make sure that charities and social enterprises can get the investment they need to do more of their fantastic work.

“It’s vital to have a good understanding of where social investment is today, as the starting point to chart a course for the future. This report helps with that, and builds on Big Society Capital’s commitment to improved data and transparency around social investment.”

 Since it was set up as an independent organisation in 2012, Big Society Capital said it has invested £261 million (A$497 million) in specialist organisations that lend to charities and social enterprises.

In Australia the impact investing market is also growing. Impact Investing Australia told the Federal Government’s Financial Systems Inquiry in its written submission: “With the right policies in place, Australia’s impact investment market is forecast to grow at around the international benchmark of over 30 per cent. That would see the domestic market reach $32 billion in the next decade.”

Read the full UK report here.