Big Society Capital has significantly reduced its annual losses since last year, but its latest accounts warn that the coronavirus outbreak could lead to a significant drop in the value of its social impact investments next year.
The social investment wholesaler’s accounts for the year to 31 December 2019, published on Companies House this week, also reveal that the organisation made a record £2bn available to organisations with social missions last year, up from £1.7bn in 2018.
Big Society Capital showed a net profit of £800,000 in 2017 – the first time it had recorded a surplus since it was set up in 2012 – but made a loss of £6.5m in 2018.
But in 2019 the organisation significantly reduced its deficit to £2.1m, the latest accounts show.
Although coronavirus, which was not officially labelled a pandemic until March this year, did not affect the value of Big Society Capital’s investments in the period covered by the accounts, one section of the report warns that it will have an impact in the current financial year.
“Initial indications are that the consequences of the outbreak are likely to lead to a significant write-down of the social impact investment portfolio in 2020, although it is not possible at this stage to quantify the impact within a reasonable range,” the report says.
But it adds that the biggest impact is likely to be on the organisation’s direct lending activities through debt funds, social banks and the community development finance institution sector, which represents 30 per cent of the portfolio.
And it says that some investments, such as those in the technology sector, might see some benefits.
“The duration of the pandemic and the speed of economic recovery will ultimately be significant drivers of the longer-term valuation impact of the current crisis,” the report says.
“The company is actively working with its fund manager partners to assess the financial and social impact risks arising from the pandemic across its social impact investment portfolio, with particular focus on the most vulnerable front-line sectors such as hospitality, care and small enterprises financed through debt funds, and on fund managers facing potential liquidity gaps.”
And it says that the company has activated its business continuity plan and implemented several actions and policies to manage risk, support its employees and ensure the continuing operation of key business functions during the crisis.
Cliff Prior, chief executive of BSC, said: “Big Society Capital’s improved financial results are driven by a combination of growing income and lower write downs in our social impact investment portfolio, together with improved returns from our Treasury portfolio.
“It’s important to bear in mind these financial results cover 2019, and do not reflect the far-reaching consequences of Covid-19.
“The impact of the pandemic will be felt most keenly by the most vulnerable people in our society, and we are working with partners to direct social impact investment to where it’s most effective, and where it can best contribute alongside other funding measures for the sector.”