Combining capital for maximum impact
We are keen to make social investment accessible and useful – both to a broad range of front-line organisations and investors alike. Blended finance, bringing together different kinds of capital from various partners, is one tool we can use to achieve this goal. Since we began ten years ago, we have been working to build blended capital structures and support the provision of blended finance products - including supporting the creation of Access (The Foundation for Social Investment) in 2014. To date, we have committed over £148 million in 33 blended finance funds, making over £270 million available to social purpose organisations.
- £148m+ committed to blended finance funds
- 33 number of blended finance funds we have invested in
- £270m made available to social purpose organisations using blended finance
Timeline of blended finance at Big Society Capital
What has it looked like in practice so far?
Social impact investment is a constantly evolving space so there are many examples of how blended finance products and blended structures have been used to create impact, particularly in the international development space. As we build the necessary resources for tackling the social inequalities we currently face in the UK, we have tried a number of different approaches. At Big Society Capital we continue to work with partners to develop and improve these to find the approaches that are most effective.
-
Understanding blended finance structures
Operating at fund level to unlock larger, more diverse pools of capital for organisations who are looking to increase their social/ and or environmental impact.
-
Understanding blended finance products
Blended Products are finance packages that enterprises can access directly. They combine repayable finance alongside a second element that does not need to be repaid, for instance a direct grant and/or free advice and business support (also known as technical assistance).
How does it help providers of grants, guarantees, reliefs and policy makers wanting to creating positive impact?
Blended finance unlocks larger, more diverse pools of capital for organisations who are looking to increase their social and or environmental impact but that have limited budgets, such as Government, quasi-governmental organisations or charitable foundations. By using their precious grant funding as leverage, it increases the amount of funding into the impact areas they are targeting, allowing a greater scale of capital to flow into communities that need it most. There are also enterprise models that achieve their mission through trading, meaning some of this can be supported through repayable finance rather than grants, resulting once more in an increase of funding available.
How does it help investors looking to make a difference and with requirements on their return?
Investors who have capital which they are seeking to allocate towards impact, whether individuals or institutions, may face barriers in reaching certain types of investees or enterprises that best align with their purpose. For example, there may be a gap between the perceived risk/return on high impact projects and the requirements the investors has on their capital
Blended finance attracts a greater pool of investor groups by creating conditions where it is possible for individuals and organisations to align their investment with their own values. It acts to lower the risk around deals and reassure those groups who may have previously held the assumption that there would be a too high level of defaults to make it an attractive proposition.
How do they meet the needs of investors and frontline organisations?
Blended finance helps to bridge the gap between investors (supply) who make the investment and the investees (demand) who take on investment. The creation of blended finance structures and products helps to balance the needs of both parties. For investors by mitigating risk, return and effort and for social enterprises and charities by increasing the availability, flexibility and affordability of investment capital.
