Investment requirements

We have some specific requirements linked to the sources of our capital. We work hard to adapt to proposals that fulfil our mission, while living up to our legal obligations.

Who we invest in

We invest with fund managers and social banks rather than directly into enterprises. This wholesale role is set out in the Dormant Bank and Building Society Accounts Act 2008, which directs us to ‘assist or enable other bodies that give financial or other support to third sector organisations.

We aim to work with diverse fund managers and other financial intermediaries to deliver our strategic goals to build a broad market tackling social issues at national scale.

AllChild Link worker and student walking

Eligibility criteria for BSC investments

Our investment process considers the social impact, financial return and systems change risk and return of each investment, and the fund managers ability to deliver.

The process has four stages: pre-due diligence, due diligence, onboarding, and ongoing portfolio management. Due diligence and onboarding alone typically take between four and ten months combined; pre-due diligence timing varies depending on your proposal and our committee schedule.

  • Essential

    • Frontline eligibility: We invest with fund managers that provide financial or other support to third sector organisations and other impact enterprises.
    • Third sector organisations are defined in the dormant accounts legislation as those that "exist wholly or mainly for the benefit of society or the environment". These include asset locked organisations such as charities but also include for-profit social enterprises where we have additional protections in place.
    • BSC is required to target its frontline portfolio to a “third sector” definition at least equivalent to the amount of capital received from dormant accounts – with the ability to invest beyond this through the capital received from shareholder banks and other sources.
    • Subsidy: While BSC is fully independent from government – given we were established through an act of parliament (Dormant Accounts Act) we were required to come under State Aid – now Subsidy Control Act. This requires us to be considering where we may be providing subsidy in investments with additional restrictions in some cases. We will notify you if it relevant to your investment.
    • Political Neutrality: Our founding documents requires us to be investing without political influence or party political consideration
    • Transparency: Transparency is also one of our founding principles, and our investment agreement with you will include transparency requests
    • Responsible Business Principles: We will also ask you to sign up to these and to undertake that your investees will also do so too. These are not intended to be onerous, and cover basic behaviour that most businesses would consider standard practice, including fair treatment of employees and upholding high standards of integrity

  • Where we have flexibility

    • Size: The typical commitment size will differ by asset class – with most investments across our portfolio between £500k and £15 million.
    • Structure: We typically invest in pooled vehicles like limited partnerships but have the flexibility to invest through a variety of structures, such as direct debt in a fund manager or co-investments.
    • Term: New investments are expected to have a term of between 5 and 12 years. In exceptional circumstance, an investment may have a longer term outside the typical upper bound if we believe there is strong alignment with our strategic goals, appropriate for our portfolio liquidity position and mix, and the risk-return is appropriate.
    • Match requirement: We will look for at least 1x like-for-like match to each investment, though we aim for a significantly higher overall match across our portfolio.
    • Geography: We invest to grow social impact investment in the UK. For multi-geography funds we will look for at least 2x our commitment into enterprises delivering UK impact
    • Financial returns: We invest along a risk-return spectrum that reflects a range of proven to unproven investments into business models, social issue areas, products and managers. We do not have a set return target that individual investments need to meet. Instead, we assess the financial return against likely risk, impact on people, systems change potential and the ability to attract other investors. We allocate our capital to prioritise impact and systems change, sizing investments to deliver our overall portfolio financial goals and diversification of factor risk, including liquidity
    • Social impact: Our 2030 strategy focuses on four challenge areas in the UK where social need, scalable business models and long-term national priorities best align. These priority areas are: Housing, Economic Opportunity, Climate and Energy and Health. We have invested in other impact areas where the investment contributes to our broader strategic objectives
    • Systems change: We prioritise investments that can contribute to broader changes in the investment and social issue systems we seek to influence over the long term, through building sustainable enterprises, new impact financing approaches and changes in policy and markets