The value of investments in socially beneficial businesses and projects now stands at £1.5 billion, according to the first report of its kind in the UK.
Big Society Capital, the social investment organisation and author of the report, found that nearly 3,500 social investments had been made by the end of 2015, with around 3,000 different charities and social enterprises currently benefiting from the growing trend to invest money with a purpose beyond profit.
The report also found that:
- Two-thirds (70%) of social investment is channelled to charities, and social enterprises with some kind of asset lock, which means that the capital cannot be used for private gain (making profit from share holdings, for example), which is more akin to charity giving. The rest of social investment (30%) is focused on social enterprises and profit-with-purpose companies without an asset lock, meaning investors can expect some form of return on their capital over time.
- Higher-risk products are now a significant part of overall social investment. Social bank loans to asset-locked organisations are still the single most prevalent product, but products such as social property funds (8%), unsecured loans (10%), community shares (6%), charity bonds (6%), and equity-like products (2%) have emerged strongly in recent years.
- Social investment deal-flow in the 2015 calendar year saw around £428m of deals offered to about 700 charities and social enterprises. It appears that deal-flow has more than doubled in value since 2011, representing roughly a 20% annual growth rate. A lot of the growth in deal-flow has come via higher risk products.
The Government is looking at ways to make socially-minded investing more appealing to a wider audience of smaller, private investors rather than institutions, who currently make up the lion’s share of the demand. Big Society Capital calls this the “Mass Participation” strand of growth and highlights community shares and Social Investment Tax Relief (SITR) products as the biggest contributors here. Community shares contributed £96 million in total, or 6%, through 353 investments. Social Investment Tax Relief contributed £1 million, through 9 investments.
Matt Robinson, the outgoing Head of Strategy at Big Society Capital and the report’s author said: “We believe that social investment in the UK is now helping thousands of charities and social enterprises. We are seeing a diverse range of different investment products, with quite significant growth in higher-risk forms of capital such as unsecured loans, community shares and charity bonds. This research also shows that social investment deal-flow is growing, and is more than double the level of five years ago.”
Cliff Prior, Big Society Capital’s new Chief Executive Officer said: “Big Society Capital’s job is to make sure that charities and social enterprises can get the investment they need to do more of their fantastic work. It’s vital to have a good understanding of where social investment is today, as the starting point to chart a course for the future. This report helps with that, and builds on Big Society Capital’s commitment to improved data and transparency around social investment.”