Big Society Capital has produced its first comprehensive estimate of the size and composition of social investment in the UK.
We have done this to take stock of progress in developing social investment, and to gauge how relevant it is becoming as a tool for charities and social enterprises. It has also been facilitated by recent advances in data and transparency. As a company we have always defined social investment as ‘the use of repayable finance to achieve a social as well as a financial return.'
In this paper, we add a further definition: that social investment requires both the investor and the user/investee to explicitly intend to create a positive social impact. On this basis:
- Social investment in the UK is worth at least £1,500m. This is the value of social investments outstanding at the end of 2015.
- There are nearly 3,500 different social investments outstanding at the end of 2015. We are confident this means at least 3,000 different charities and social enterprises are benefitting from social investment.
- Over two-thirds (70%) of social investment is channelled to charities and social enterprises with some sort of asset lock. This is also the part of social investment emphasised by Big Society Capital’s current strategy.
- The rest of social investment (30%) is focused on social enterprises and profit-with-purpose companies without an asset lock.
- Higher-risk products are now a significant part of overall social investment. Social bank lending to asset-locked organisations is still the single most prevalent product, but non-bank lending (10% of social investment by value), social property funds (9%), community shares (6%), charity bonds (6%), and equity-like products (2%) have also emerged in recent years.
- Social investment deal-flow in the 2015 calendar year saw around £427m of deals committed to around 700 charities and social enterprises. Although perfect comparisons are difficult, this would appear to suggest social investment 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.
Beyond social investment itself, we have roughly assessed wider forms of UK impact investment in which either the investor or the user/investee (but not both) is socially motivated. Big Society Capital estimates that investor-led impact investment is worth at least £3.2bn and investee-led impact investment, which includes all housing association debt, at least £68bn.