UK social impact investment market breaks £5bn barrier

The social impact investment market in the UK grew by nearly one-fifth in 2019 to more than £5bn, according to new research.

Figures released by social investor Big Society Capital show that more than £1.2bn was committed to 1,192 charities and social enterprises, and the number of transactions made in the sector increased by 18 per cent year on year to more than 5,000 in 2019.

Investment came from a range of sources, including venture capital funds, social banks, social property funds, charity bonds and specialist lenders.

The social impact market has grown sixfold since in the past eight years. BSC’s latest annual estimate shows that most of the growth over this period has come through alternatives to traditional bank lending, which rose from £169m in 2011 to almost £3.4bn in 2019. 

Social property funds, which did not exist eight years ago, now account for the biggest segment of the market at 42 per cent, followed by secured bank lending (34 per cent).

Venture investing, where investors provide early stage and growth capital for projects that tackle social issues such as childhood obesity, has also grown 50 per cent year on year.

Not all charities and social enterprises have assets against which a loan can be secured, BSC said, but the amount of unsecured, non-bank lending has doubled since 2011, with more than 1,600 investments now outstanding, valued at £327m – including blended finance.

Stephen Muers, interim chief executive of BSC, said: “It is very pleasing to see the substantial growth in the market to the end of 2019 and the growing popularity of the different investment options available.

 “The impact of Covid-19 has been both social and economic, and I believe will be a key driver in shifting investors’ focus from a purely financial return to one that delivers a social impact too.”

In addition, BSC said that commitments made to its Growth Fund show that there is still a demand for lower value deals, which make up just under 20 per cent of the market.

The fund, which is managed by Access – The Foundation for Social Investment, with funding from The National Lottery Community Fund and BSC, was set up to enable charities and social enterprises to access repayable finance of up to £150,000.

Seb Elsworth, chief executive of Access, said: “The Growth Fund continues to be a cornerstone of social investment in England, with around one in six of all deals in 2019 coming from the programme. 

“Average size investments of just over £60k are meeting clear demand from the sector. These numbers show the vital role blended capital plays and the need for long-term subsidy to support it.”

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