What's in a market?

Every year, we publish an estimate of the size of the social impact investment market in the UK. Today, as we report ever greater amounts of capital flowing across the social impact investment market, there’s a risk of focusing on the big numbers rather than what is behind them – and who they connect – which is ultimately why it matters that this market grows.


Written by

Anna Shiel, Chief Investment Officer

There is so much diversity among the enterprises that make a difference to people’s lives, from local and community enterprises to housing associations and scaling social enterprises, why would one single tool be right for all of them?

And since ultimately, the purpose of markets is to connect - buyers to sellers or investors to investees - we also need to take into account the different requirements of a range of investors if we are to really increase the amounts of capital for enterprises that are improving lives.

Much of Big Society Capital’s activity since we were founded (cornerstone investments, convening and engaging investors, charities and social enterprises, building intermediaries) has been focused on developing a diverse market. Our work has so far helped lead to a 20x increase in the scale of available investment beyond bank lending.

So, we thought it was worth some more reflection on what and who the four main segments of the market are there for - and how they are driving more capital towards improving society.

Debt for charities and social enterprises (via social banks, charity bonds and non-bank lending):

  • What it’s for: to help sustain and grow the impact of charities and social enterprises, who can use debt for investment in buildings, assets and people to build or grow trading income. Borrowing provides working capital and growth finance to charities without requiring them to give up ownership and can often be the simplest tool.

  • How it’s changed: we’ve seen real growth in the numbers of charities and social enterprises who have used this type of finance, from 2,500 investments in 2011 to 4,100 in 2019. And there are now more investments made in the riskier end of the spectrum – investments offering blended finance, limited security and more patient, flexible payments terms have more than doubled to over £300 million (1,600 investments) during that period. We have also seen more grant funders are coming into the blended finance sector, enabling it to grow.

  • What are we learning: There is growing confidence in access to finance: 32% of social enterprises sought debt finance in the past 12 months vs 23% in 2015, with the majority obtaining the amount of finance they were seeking [1]. Yet the diversity of the sector means we continue to need to be a variety of debt tools, from social banks providing secured loans to organisations with assets through to blended finance for those earlier in their path to revenue. And we won’t be able to grow this market without investors – to attract them, we are likely to need more grant and guarantees, especially for the riskier products.

Venture and equity:

  • What it’s for: to seed and scale impact ventures by providing early stage and growth capital. These ventures can provide scalable solutions to huge social problems like mental health and financial inclusion – but need investors who can back them throughout a rapid growth path, participating in risk and return as partial owners. This also includes patient, equity-like capital for community-based organisations, such as community shares.

  • How it’s changed: the amounts of capital invested have grown substantially, from £13 million in 2011 to £473 million in 2019. To date this been driven by ClearlySo fundraising from angels and family offices and specialist funds such as Bridges investing into businesses like AgilityEco, and more recently we have also seen a huge increase in venture capital funds with an impact lens: from 3 in 2012 to 28 last year.

  • What are we learning: the entry of impact venture funds, like Eka and Connect, is bringing both capital from new investors to impact, such as British Business Bank, and their experience of rapidly scaling businesses to help ventures like Second Nature to change the lives of many more people. We know this market is growing fast and is likely to be significantly larger than our estimate. [2]

Outcomes finance:

  • What it’s for: when contracting with organisations to deliver public services, shifting payment away from prescribed inputs and towards achievement of desired outcomes can drive greater impact for citizens and better value for money for the public purse. Outcomes finance provides the working capital to charities and social enterprises so they can deliver these government contracts where payments are based on outcomes achieved. Importantly, the investor shares financially in the risks of impact performance.

  • How it’s changed: the value of investment of outcomes contracts has grown from one contract of £5 million in 2011 to £68 million, across 80 contracts – which we estimate have had an impact on over 30,000 people. Government support is critical to the development of the market. We saw a peak of new contracts in 2017 and 2018, driven by the Life Chances Fund, which provides central Government top-up to local authorities looking to contract in this way.

  • What are we learning: the outcomes finance model can offer flexible design and delivery of services, genuine collaboration across stakeholders and much stronger accountability for results than traditional contracting mechanisms. We are seeing some increase in scale driven by local authorities replicating and growing increasingly successful outcomes programmes, for example Fusion Housing, Kirklees. This has also been reflected in the increase in average investment size over the last decade. And we are seeing particular success of outcomes finance in certain social issues, such as homelessness and children in care.

Social property:

  • What it’s for: to provide a new way for social housing providers to access capital at scale to acquire and develop homes and help bridge some of the three million shortfall of affordable housing and tackle rising homelessness. This in part responds to a significant reduction in the government capital grant available since 2010. It also seeks to attract investors like pension funds who have large amounts of long-term patient capital and want to allocate to impact, sometimes with a local focus.

  • How it’s changed: this wasn’t really a market that existed in 2011 but has now developed into one with over £2 billion invested assets, with support from Big Society Capital’s cornerstone investments. There are now 12 dedicated fund managers who come both from the social investment sector and the commercial real estate market – and many more funds under development. Already, these funds have capacity to house over 10,000 people.

  • What are we learning: this segment is attracting significant amounts of capital from institutional investors like pension funds because there is a good match with their investment parameters, as well as tangible impact. We need to ensure that this type of money also works for the investees – whether housing associations like United Communities, charities or local authorities - through appropriate risk sharing on leases and embedding common impact measurement and standards.

While the markets may be varied, what unites them is their social purpose. That’s important because we believe that “markets” can make the greatest positive impact when investors and investees are both committed to the same social mission.

And with COVID-19 exacerbating existing social issues and inequalities, we require an ever more unified approach which aligns everyone’s skills, resources and energy to bring about lasting change.

Stay tuned for deeper dives into the different segments of the market and what we're learning over the coming weeks.


[1] Source: SEUK, Capitalism in Crisis. 16% of social enterprises seeking finance did not raise anything

[2] For example, Dealroom estimated SDG-related dealflow in the UK at EUR 1.9 billion in 2019. We think the number that relates to 'impact dedicated' funding is a subset of this larger figure, and we will revisit this in future

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Anna Shiel

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

Market data

Explore the latest annual estimate of the size of the social impact investment market in the UK.