Another year of substantial growth – reflections on 2021 market sizing data

As we reflect on another year of substantial growth in the social impact investment market, I’m sure some of you will already be beginning to dig into what’s beneath that headline figure. And it won’t take long to spot that, while we’ve seen strong overall growth across all segments of the market, there are different rates of growth across different segments and also some differences between trends in value and numbers of investment.

And we don’t think that’s surprising – as we’ve discussed before, there isn’t a single social impact investment market but many, connecting a variety of enterprises and investors. At Big Society Capital we have different roles to play in growing and supporting this breadth. We’ve explored one dimension of this before, which is the different financial products, the different types of enterprises they serve and different stages in their journey, and the nature of the impact they support. This is encapsulated in our “Market Systems”.

I’d like now to dig into a different aspect that I think is key to understanding some of these patterns of market growth. This is the different paths to scale (of capital and impact), how that affects some of the trends we are seeing and why that matters.  Looking across the market, we see two key routes to scale – via commercial markets and via subsidy – driving different rates and patterns of growth across the market and also shaping our role as a market builder.


Written by

Anna Shiel, Chief Investment Officer

Scaling via commercial markets

So, let’s start with looking at the areas of the market that have shown the strongest growth, particularly in terms of the value of capital flowing. The three segments of the market where we have seen greatest growth in the past year are:

  • Impact venture: 30% growth, driven by high levels of venture activity generally in 2021, but particularly significant momentum behind purpose-driven founders in recent years
  • Social property: 30% growth driven by new entrants as well as existing impact funds attracting and deploying more capital from institutional investors allocating to social & affordable housing
  • Charity bonds and social banks: 14% growth driven by asset-based charities seeking to expand community and social services in areas of high need

In many respects these are very different in the nature of their investees (size, stage of development and whether they have assets) and the financial products, ranging from equity to debt. So, do they have anything in common that is fuelling this growth? I see three important features:

  • They are in social issues where there is substantial capital need from enterprises to make a dent on problems affecting many millions of people – issues like homelessness and financial inclusion
  • They can generate returns and risk profiles that are consistent with the requirements of investors looking to allocate substantial amount to impact, such as local authority pension funds in social & affordable housing
  • They are attracting fund managers – like Eka and Connect - who have both the experience to make those investments but also the desire to use those skills to support purpose-driven enterprises where they see a viable and growing market opportunity

With the exception of social banks, all of these markets were either non-existent or very nascent 10 years ago – and now represent the largest amount of the market by value (>60% of amounts outstanding1). So, what we are seeing is that new sources of capital are being brought in at scale to tackle social issues where we collectively can find the intersection between impact-led business models and investor requirements – and that’s what’s driving that pace of growth.

Given the scale of these markets, and the amounts of capital that can be brought in alongside us, our own capital represents a smaller proportion: 5 - 10% of those scaling via commercial routes compared to 25 – 50% in the markets scaling via subsidy.

Scaling via subsidy

Firstly, what do I mean by this? There are enterprises with solutions to some of society’s toughest problems – children in care, youth unemployment, and strengthening communities - which though fundamentally viable, may have business models which generate lower returns or have higher perceived risk due to the way they serve people with higher needs or in more vulnerable circumstances.

These are the parts of the market where we see the greatest overall numbers of investments (40% of the market outstanding as well as investments made in 2021), reflecting their vital role in reaching these high impact enterprises across the country as well as the typically smaller amounts of investments they need.  For example, 76% of loans in our social lending portfolio were to organisations supporting vulnerable or underserved people.

And there are two key areas I wanted to highlight here:

  • Non-bank lending meets the need for unsecured and/or smaller loans, sometimes on more flexible terms, from social enterprises and charities who work largely to support more vulnerable or underserved people. This is often provided by dedicated fund managers like Key Fund and Big Issue Invest, serving enterprises like Food Works in Sheffield and Smile Together Dental CIC. We saw this segment of the market grow by 10% by number in 2021 (6% by value), built on continued take-up of blended and guaranteed loans and support from dedicated fund managers. In some segments, we saw some declines in the number of new loans made in 2021 compared to 2020, as the exceptional levels of lending in the early months of the pandemic began to normalise.
  • Social outcomes partnerships remain a small yet significant part of the market. This market has been somewhat more static due to dependency on government commissioning, with deal flow and outstanding investment roughly unchanged from 2020.  However, in 2021, 2 new commitments were made to SOCs (~£3million) across the policy areas of employment, health, and social care in varied locations across the UK.

This is where subsidy from government and others in the form of capital grants, guarantees, tax relief and revenue support play a vital role in unlocking and growing the potential of these enterprises to both improve lives while also saving money for government. Over a ten-year period we can see growth rates of these segments has been lower or more variable due to the waxing and waning of key sources of subsidy. But throughout this period has been enterprises using investment to meet vital and growing needs in communities across the UK.

The role that well designed subsidy can play is evident from a report released recently by Big Society Capital , Outcomes For All: 10 Years of Social Outcomes Contracts, which included an independent analysis of public value created to date. This analysis shows that over the last decade over £1.4billion of public value has been created at a cost of just under £140million to government, this means that for every £1 government has spent a further £10 of value has been created, of which almost £3 is fiscal (cash saved and costs avoided).

It is also essential that this is subsidy which is sustained over time. That’s why we are particularly focused on two priorities, where we are working with the sector and government to secure sustained subsidy:

  • Community growth enterprise plan: working to ensure dormant asset funds are channelled through social investment to places and communities that have previously been deprived of investment
  • Social outcomes partnerships: making the case to government for social investment/social outcomes contracts to be an effective way to deliver public services in a tailored and local way


One of the challenges of reflecting on this data now is that we’re looking backwards - and the outlook today, with rising energy costs, broader inflation and market uncertainty affecting the lives of millions of people and the enterprises that support them.

At the same time, we believe that both of these routes to scale are demonstrating how they can deliver meaningful social impact – impact which is much needed to tackle the challenges ahead. We are committed to driving both forward in the coming years, and if this data and these insights encourage you to do the same, do get in touch.

Anna Shiel.jpg

Anna Shiel

Chief Investment Officer
Talk to me about:
Social banks, social property, new investment ideas and partnership opportunities