Social impact investing attracting additional monies – up 18%
Investment into tackling social issues in the UK continued to grow last year, against a backdrop of rising interest rates, the cost-of-living crisis and turmoil in wider financial markets where both private and alternative investments have seen falls.
Big Society Capital, the UK’s leading social impact investor, has published its annual survey showing the amount invested into tackling social issues increased to £9.4 billion in 2022, up from £7.9bn in 2021.
Big Society Capital attributes increasing investor appetite for social investment to three key drivers: social investment offers a diverse portfolio of investments that provide resilient returns; the sectors where it invests all have strong long-term demand characteristics; and many investment areas like social housing are backed by Government statutory funding making them resilient to macroeconomic forces.
Stephen Muers Big Society Capital CEO said:
"The continued growth in social investment in this challenging environment is welcome and demonstrates an increasing investor appetite for creating positive change to people’s lives. But evidence shows that significantly larger amounts of private capital are badly needed to help tackle social problems.
The time is now for the Government to build on this British success story and help unlock social impact investment at much greater scale – without spending a penny more.”
Big Society Capital believes there are three key ways the Government can unlock this increase in investment – without needing to spend more. Firstly, by allocating a significant portion of its new tranche of dormant assets to social investment to maximise its impact; secondly, by innovating its approach to public service funding for complex social issues to harness more finance through outcomes partnerships; and finally, by using existing housing budget to catalyse private investment into social homes.
Social impact investment has increased more than ten-fold since 2011 - when it was £830m - to the £9.4bn in 2022. Over this time more than 5,000 organisations have used the capital from social investment to deliver key services and support to communities throughout the country.
In 2022 alone, £1.8 billion was committed across 1,310 investments into projects that deliver measurable social impact such as affordable homes, community food banks and tech startups tackling mental health.
Culture Secretary Lucy Frazer also commented on the announcement:
“Social impact investing attracts private investment to deliver measurable outcomes for a public good.
“This Government has championed this approach so that we can leverage more funding to kickstart innovative projects. Through social outcomes partnerships and the Dormant Assets Scheme the Government has played a pivotal role in growing the market.
"Reaching this landmark of £9 billion shows that social impact investment works for both investors and those that need it most.”
The research shows that social impact investment is increasingly reaching the areas that need it most - with 82% of organisations receiving social lending based outside London; and 62% targeted at the UK’s most deprived communities according to the IMD Index. 18% of the organisations surveyed were based in the north west, including Open Kitchen, a sustainable catering business in Manchester which has taken on social investment from Access and Key Fund – which invests grants and loans into community enterprises that are
traditionally excluded - to provide local people with meals and grocery parcels at a time when approximately 18% of the UK households are experiencing food insecurity.1
Corin Bell, Executive Director at Open Kitchen, said:
“There’s not a mainstream bank in this country that would have supported us as a small independent food and drink venture during the tricky economic climate of 2021 – so we simply wouldn’t be here if it wasn’t for Key Fund and its investors such as Big Society Capital.”
Also the Greater Manchester Young Person’s Homelessness Prevention programme – which uses social outcomes funding to work with 1,500 young people at risk of homelessness to stabilise their housing or find alternative accommodation.
Rachel O’Connor, Programme Manager at the project, said:
“The funding model is completely innovative when compared to traditional public service commissioning, it gives us the flexibility to place the young person at the centre of everything we do.
“If we want to improve the lives of people facing complex, interconnected challenges, we need a more targeted, holistic approach and this model enables us to do this, so they have the choice and control of their interventions.”
Big Society Capital was capitalised with funds from English dormant bank accounts and investment from the four major UK high street banks: Barclays, HSBC, Lloyds and NatWest Group. The key areas for investment are lending to social enterprises and charities; social and affordable housing; social outcomes partnerships and impact venture.
For each sector:
- Investments into social and affordable homes increased by 35% in 2022, to £5.1 billion. This money has gone to organisations such as P3 Charity, which using social investment from managers including Social and Sustainable Capital has provided 300 quality homes for people across Gainsborough, Leicester and beyond.
- Social lending including bank, non-bank and charity bonds was up 6% to £3.5 billion, There was a sharp increase in deals in 2020-2021 as a result of a high number of emergency COVID deals. Recipients include New Leaf, a Birmingham social enterprise supporting ex-offenders into employment.
- The impact venture market down 10% to £673 million, a decrease which reflects wider trends in the venture investment market.2 Recipients include Switchee – a smart thermostat for social housing which enables social landlords to identify properties at risk of damp; and RideTandem, a mobility app tackling transport poverty.
- Social outcomes remain a small yet significant part of the market at £28 million. The UK remains a global leader in public service innovation - having launched 90 projects to-date tackling complex social issues including labour market inactivity, mental health among young people, criminal justice and NHS backlogs.
Big Society Capital has been surveying the size of the market since 2016, continually improving its methodology for collecting this data. It includes data from investments in Big
Society Capital’s own portfolio, as well as the wider UK social impact investment market. Inclusion is based on investments made with impact intent.
ENDS
Big Society Capital CEO Stephen Muers plus case study representatives available for interviews on request.
Press contact: Caroline Hailstone chailstone@bigsocietycapital.com
About Big Society Capital
Big Society Capital is the UK’s leading social impact investor. Our mission is to grow the amount of money invested in tackling social issues and inequalities in the UK. We do this by investing our own capital and helping others invest for impact too.
Since 2012, we have helped build a market that has directed more than £9 billion into social purpose organisations tackling issues from homelessness and mental health, to childhood obesity and fuel poverty, a ten-fold increase in ten years.
