Market sizing methodology

Published

Each year since 2016, we have produced a comprehensive estimate of the size of the UK social investment market through our market data research. The purpose of this exercise is to share insight on the development and composition of the current market as we see it evolving and identify further growth opportunities and trends.

The UK social impact investment market is a subset of the broader UK impact investment market and is highlighted in Segment A in Figure 1 below, with Segments B and C illustrating the broader UK impact market. For the purposes of the market sizing, social impact investment is defined as:

‘Repayable finance to enterprises with a social purpose such as social enterprises and charities. The investment enables them to deliver products or services that create measurable, lasting social impact that improves people’s lives. Social impact investors are seeking positive social impact as well as a financial return’


Four broad segments of social impact investment

Market sizing methodology diagram .png

Figure 1

A – this is the segment our annual market sizing is focussed on. Social purpose organisations, such as social enterprises or charities that use repayable finance to help them increase their impact on society. For example, by growing their business, providing working capital for contract delivery, or buying assets.

B – where only the investor intends to make a positive social impact i.e., fund manager explicitly focussed on investing in social initiatives, invests in an organisation that doesn’t explicitly intend to have social impact, but it may be incidental.

C – where only the user (investee) intends to make a positive social impact i.e., an organisation delivering social impact that takes on repayable finance from a high street bank.

D - an initiative with primary environmental intent where social impact may occur i.e., through employment and/or education.


2020 market sizing methodology

To calculate an estimate of the market size, the team developed the following methodology to guide the research.

1. Build and refresh the market list of impact investing organisations that meet our definition and criteria

Our existing list of impact investing organisations incorporates our own portfolio of over 100 investments into fund managers and social banks combined with other UK based social investors, who we are aware of through our wholesaler investor role, and partnerships and meet our definition above (even though Big Society Capital has not itself invested). To test investor impact intent, we look for evidence such as articulation of impact goals, developed impact management processes and the production of an impact report. To test investee intent, we consider factors such as social objects, targeting of specific social impact with its goods and services and asset locks for mission. Each year, we will also do a market scan to update any new investors added to the market that we are aware of and meet our definition and the following criteria:

  • Organisations, specific funds, or investments that are both based and invest their capital in the UK (excludes overseas investments from UK based organisations).
  • Organisations, specific funds, or investments focused on achieving social impact excluding investments focussed predominately on environmental impact i.e., includes community renewables but excludes green bonds.
  • Organisations, specific funds, or investments that make direct investments into social enterprises, charities and social purpose organisations i.e., we collect market data at the investment manager level rather than investor level as shown below.

Three levels of the social impact investment market

Three levels of social investment market.png

Figure 2

2. Define the key metrics and definitions for market sizing approach

We defined which metrics to use and agreed a set of definitions for these metrics to identify an estimate of the size of the market.

Metric A: Market size (£) is the current outstanding value of social impact investments (i.e., balance sheet amount) at 31/12/2020. It is the value of capital out (drawn down), less capital back in (repaid) plus/minus valuation adjustments. This also includes the # of investments made that make up the total value of the market size identified. This is taken from publicly available releases on fund managers’ websites, or from reporting received from fund managers when data is not publicly available. We anonymise the individual amounts attributable to each investor as not all the data is publicly available.

Metric B: Deal Flow (£) is the amount of social impact investment commitments made in 2020. This also includes the # of investments that make up the total amount of deal flow. This can be harder to nail down as not all fund managers measure a commitment at the same time. It may be “Investment Committee approval” or “legally signed date”.

3. Collect and aggregate key metric data for list of impact investing organisations

For each of these organisations, we collect data on Metric A and B through the methods below:

  • Our own portfolio data through valuation information available to Big Society Capital.
  • Publicly available sources i.e., published annual reports and balance sheets.
  • Direct requests and contributions from partner and non-partner organisations to provide figures for their investments, on the basis that this would be aggregated into product level categories and not individually attributable back to intermediary level.

For any new investors added to the 2020 estimate, we also went back to prior years and added metrics for those to ensure comparative periods were comparable.

4. Benchmark our findings and compare to our prior years and other organisations’ market sizing reports

To sense check our findings, we compare the aggregated key metrics against our previous years’ market sizing to understand the growth of the market and growth or reduction in individual products or asset classes. We review our methodology and compare our market size value and deal flow amount against other social investment organisations who have completed a similar exercise i.e., GIIN, European NABS and the Impact Investing Institute.