Social Investment Wholesalers and Market Builders explained

A key role of a social investment wholesaler is to “build the market”, often described as a ‘market builder’. What this means in practice is beyond investing – they help to develop, strengthen and grow the social investment ecosystem. Market builders work to create better conditions for effective investment and meaningful social outcomes. This includes:

• Catalysing new products, markets and co-investment opportunities
• Influencing government and policy to improve the environment for social investment
• Capacity building – supporting social enterprises, charities and fund managers to raise investment for the first time
• Developing infrastructure – creating platforms, networks and frameworks such as impact measurement tools
• Sharing knowledge, learning and promoting collaboration

In the UK, there are three social investment wholesalers that are funded by Dormant Assets and other sources of capital. The government-led Dormant Assets Scheme helps recycle unused capital for public good and is instrumental to the wholesalers’ delivery of the Community Enterprise Growth Plan - a shared vision to invest in entrepreneurial approaches to tackle social problems in underserved places and communities.

Whilst sharing the same vision, each wholesaler plays a distinct role to build the social investment market and meet different needs for capital.

Better Society Capital (BSC) was created in 2011 to significantly scale the social investment market, while also being self-sustaining. The ‘self-sustaining’ objective is essential for two reasons. First, to ensure BSC continues to have capital available to support the future needs of more organisations. Second, attracting further capital to grow social investment to address the scale of need requires demonstrating that social impact investment can be economically viable. Meeting the sustainability goal means that BSC needs to have a balanced portfolio of investments with different risk and return profiles. However, all investments have to meet a tough standard for creating additional impact in the market. This can be through supporting smaller fund managers to grow, and also through driving greater impact from those who have already demonstrated their ability to raise significant capital.

Since its establishment in 2011, £425 million of Dormant Assets has flowed to BSC along with £200 million of capital from four high street banks which together has been invested and then recycled to provide more than £1 billion to social purpose organisations from BSC alone. This recycling demonstrates the value of BSC’s sustainability objective. BSC has played a central role in driving a 12x growth in UK social investing, growing from £830 million to over £10 billion invested in total. This has resulted in many more social enterprises and charities being able to access much more finance, with more flexible options and, therefore, deliver more impact. Examples include the growth of social impact property funds and the growth of the charity bond market. Both barely existed until BSC began investing and supporting these markets. One fund manager – Resonance – has since raised £250 million to enable 150 social enterprises to provide safe homes for 4,000 vulnerable individuals. Equally through BSC ‘s support, charities have been able to access £337 million through the bond markets that wasn’t possible previously.

However, the sort of capital which BSC makes available doesn’t, on its own, meet the needs of all parts of the social enterprise and charity sector, especially organisations operating at a community scale.

Access – The Foundation for Social Investment, was set up in 2015 to help bridge the gap between the financing needs of smaller charities and social enterprises, and the needs of investors who are seeking to preserve their capital. Since 2019 Access has received £83 million of Dormant Asset funds (on top of a further £80 million from Government and the National Lottery Community Fund).

These community based organisations deliver deep impact and are highly entrepreneurial, operating in some of the most challenging markets and places in the country. Margins are slim, at best, and revenue streams are fragile. Lending to these organisations carries real risks from a financial perspective. Of course, individual social enterprises who take on social investment do an amazing job of balancing their impact, enterprise model and financial obligations. But overall, portfolios of loans to community based social enterprises will lose somewhere between 10% and 30%.

Access deploys grants into social investment organisations to mitigate these risks, for charities and social enterprises, for the lenders and for other investors. This approach to blended finance allows the capital provided by a range of impact investors like BSC, and an increasingly wide range of others, to serve smaller organisations who they would not be able to invest in on their own. Access also provides funds for a wide range of capacity building programmes which support charities and social enterprises to develop their enterprise income and get ready to manage repayable finance for the first time.

The architecture we have evolved today, with BSC and Access working together, provides the flexible framework to do this. BSC focuses on demonstrating where a sustainable market can exist, delivering impact and seeking to change the motivations for investors on a macro scale. Where that sustainable market is not able to serve social enterprises on its own, Access can identify and pay for the gap through blended finance – reaching places and communities that would not otherwise be able to attract investment. Two organisations each doing a specific job, which together are meeting different needs for capital.

Access has identified a number of ways in which providing targeted subsidy can enable impact investment to serve a much wider range of charities and social enterprises. However, many social enterprises led by Black and Ethnically Minoritised communities still face persistent challenges in accessing finance. 2-5% of social investment to date is estimated to have gone to Black and Minoritised-led charities and social enterprises. The Oversight Trust (2021) and the Adebowale Commission on Social Investment (2022) both highlighted these systemic barriers.

Pathway Fund, conceived in 2017 and established in 2023, is a Black and Ethnically Minoritised-led social impact investment wholesaler. Funded by a variety of foundations and Dormant Asset funds via Access, Pathway is dedicated to increasing investment in historically excluded communities across the UK. It aims to catalyse opportunities for Black and Ethnically Minoritised-led organisations, helping them to grow and thrive.

To achieve this, Pathway collaborates with key partners like BSC and Access to support organisations underserved by mainstream investment. These businesses support the social impact investment market, while also delivering social and cultural benefits. By providing targeted financial support, Pathway helps bridge systemic gaps in access to investment.

With £3 million raised and with the support of a series of Black and Ethnically Minoritised-led intermediaries, Pathway has launched four pilot programmes to expand opportunities: the Enterprise Development Programme (EDP), helping businesses scale with 83% of participants new to social investment; the Cost of Living Support Programme, offering financial relief to struggling organisations; the First-Time Fund Manager Incubator, supporting new fund managers from underrepresented backgrounds; and the Racial Equity Scorecard, promoting equity-driven investment practices.

By embedding racial equity as a core principle, Pathway seeks to shift power and capital to historically excluded communities. Guided by justice, transparency, and shared prosperity, it is expanding its reach across the UK to help Black and Ethnically Minoritised-led organisations achieve long-term financial sustainability and greater impact.

While it may seem unexpected that the UK has three social investment wholesalers, each plays a distinct and essential role in building an ecosystem that finances social enterprises and charities. By working together and adopting different approaches, these wholesalers maximise impact, drive system change, and better serve those most in need.