The UK market for social impact investment – which aims to improve people’s lives while bringing sustainable returns – has grown ten-fold in ten years from £830 million in 2011 to £7.9 billion last year, a new report reveals.
The figures from Big Society Capital (BSC), the world’s first social investment institution of its kind, shows the market has seen a steady growth trajectory year-on-year. This trend continued even after the onset of the coronavirus pandemic, with a 21 per cent increase from 2020 to 2021.
Social impact investing “critical” in cost-of-living crisis
The news comes at a time when the cost of living crisis is putting increasing pressure on communities. Despite the Government’s Energy Price Guarantee, seven million UK households are estimated to be in fuel poverty this winter while soaring inflation has left many families struggling to afford basics including food.
Stephen Muers, Chief Executive at BSC, said: “It is promising to see these figures – which demonstrate both an increasing investor appetite for creating positive change to people’s lives, and the ability of this market to stay resilient during the extremely challenging circumstances resulting from the pandemic.
“As the economic crisis worsens, the need for social impact investment to support social enterprises, charities and community enterprises will be ever more critical. We look forward to continuing our work with our partners across social investment, enterprise and the Government to provide communities with the support they need to further grow the market.
“Considering how social impact investment can play a role in alleviating the economic crisis will be particularly timely as Government looks at how to allocate further dormant assets.”
BSC aims to build a thriving investment “ecosystem” that connects capital with social enterprises, charities and social purpose organisations to help tackle pressing social issues such as homelessness, poverty and domestic abuse. It works with fund managers and other intermediary organisations to invest in their funds, help grow their products and services and attract more investment.
Beyond investment, BSC offers support from advice for enterprises seeking investment to best practice for fund managers and investors, as well as helping government develop policy.
Supporting communities most in need
The data from BSC’s annual Market Sizing exercise also revealed that of 5,900 of social impact investment commitments made in the past decade, 82 per cent were made to charities and social enterprises based outside of London, and 60 per cent to those in the UK’s most deprived communities. With households in the most deprived areas of the UK twice as likely to struggle with household bills, this growth suggests that social impact investment is helping support those communities most in need.
Enterprises that have taken on social impact investment to deal with cost-of-living issues include AgilityEco, which helps low-income households manage their energy bills through providing practical help with energy efficiency and household finances. Another is financial wellbeing app Wagestream, which is subsidised by employers and enables workers to manage their budgeting, choose their own pay cycle, and access deals on financial products.
Local renewable projects have also received substantial social impact investment – by 2020, BSC says it had alone invested in projects accounting for more than half of UK community energy generation using solar or wind. These include Community Owned Renewable Energy LLP (CORE) – a £40 million investment programme which helps purchase solar farms, with the long-term aim of turning them into community-owned assets.
In 2021, around £1.7 billion of investment was committed by BSC across approximately 1,200 investments.
Social and affordable housing funds, which aim to provide safe, affordable homes for tenants who might struggle to access mainstream housing such as women fleeing domestic abuse, continue to account for the largest segment of the total market at £3.7 billion.
Social lending – which is generally used by social enterprises, trading charities and community-based enterprises who struggle to access mainstream finance – is the second largest segment at £3.3 billion.