The scale of the UK’s social problems is far larger than the capital we have to address them. Just tackling the shortage of housing for homeless people in the UK, would require an estimated £24 billion. Therefore we must unlock much larger pools of capital by working systematically with different types of asset owners, from individuals to institutional investors, to spur new types of investment and scale more proven models.
- 100+ Number of investors who have committed capital alongside us – Data from Big Society Capital
- £1.4bn Amount of capital from other investors alongside us
- 2.3x Match ratio of investment to our capital
More investment is urgently needed to help address social issues in the UK. A range of investors can play different roles in the social impact investment ecosystem, regardless of their financial needs and social impact goals.
For example, mission-driven investors have worked with us to develop and test new investment models and approaches for tackling social issues closely aligned to their charitable objects. Large institutional investors such as pension funds, on the other hand, might find it hard to invest in small-scale or unproven investments. Yet they can play an equally important role helping to scale already proven business and investment models.
Barriers to investing for impact, particularly ‘high impact’ investments in private markets, still exist – we have much to do to make investing more accessible. Institutional investors often struggle to find opportunities with enough scale and track record, while individual investors face a lack of retail-friendly investment products.
Over the last three years, we’ve pursued a multifaceted approach to bring more capital into social impact investment:
- We build awareness and understanding of investment opportunities that can meet asset owners’ financial and social impact objectives.
- We partner with a range of investors to co-develop new financial products and investment vehicles, both catalysing new models and scaling more proven ones.
- We help set up and work through existing investor networks (such as the Social Impact Investors Group and Responsible Investor Network – Universities) to gain a deeper understanding of different investor needs, and help facilitate greater collaboration between asset owners with shared financial and impact goals.
Impact and Learning
In recent years, we’ve seen a much more diverse range of asset owners – such as insurance companies, pension funds, family offices, foundations and sophisticated professional investors – start to make or increase their allocations to social impact investments. The University of Edinburgh, QBE Insurance and Trust for London are examples of asset owners who are making investments from impact. Overall, more than 100 investors have committed capital into funds alongside Big Society Capital. Investments that have built up experienced teams that have demonstrable track records in financial return and impact are better able to attract investors that require risk-adjusted financial returns and impact.
We’ve learned that investors often find social impact investment unfamiliar, too complex and lacking the necessary scale to make an impact. For a few years, we‘ve been working with a range of partners to develop a best-in-class social impact investment product and bring it to market. We’ll continue to work in this area, with the goal of realising a product that will reduce barriers to entry for investors new to impact.
Trusts, foundations and other pioneer investors play a crucial, catalytic role, as they can provide flexible capital and have a higher risk tolerance that can help get new ideas off the ground. They can put capital behind new models and often bring additional support to new ideas. Our work with the Joseph Rowntree Foundation on the Fair by Design Fund, with Guys and St Thomas’ Charity on the Good Food Fund and a range of foundations on the Women in Safe Homes Fund. Through our networks, we have attracted £36 million of catalytic investment alongside us, and brought specific expertise across these issue-led partnerships to address particular social challenges. We want to work with a greater number of catalytic investors to test new investable models. We‘ll continue to build our network and advocate for tools that support investors to play this role.