The amount of social impact investment in the UK has grown nearly ten-fold over ten years, from £830 million in 2011 to £7.9 billion in 2021, Big Society Capital has revealed.
Data from the social impact investor’s annual Market Sizing exercise – which estimates the value of investments made by UK social impact investment funds since 2011 – shows that the market has seen a steady growth trajectory year-on-year. This continued even after the onset of COVID-19, with a 22% increase between 2020-2021.
Big Society Capital’s further analysis of 5,900 of social impact investment commitments made in the past decade revealed that 82% of were made to charities and social enterprises based outside of London, and 60% to those in the UK’s most deprived communities.
Julia Lenon, Portfolio and Data Manager at Big Society Capital commented on the findings: “Our further enterprise-level analysis of market commitments revealed that social impact investment is reaching all UK regions and positively weighted in areas of deprivation – for example, 33% of commitments were made within ‘levelling up priority one areas.’
“It also showed that people living in poverty and/or financial exclusion are the largest users of social impact investment – at 12% of commitments made. The second and third largest user groups are vulnerable young people (10%) and vulnerable older people (8%).
“We know there is more that can be done to address the regional inequalities that exist, this data suggests that social impact investment has a key role to play in reducing them.”
Enterprises that have taken on social impact investment to deal with cost-of-living issues include AgilityEco, which helps low-income households manage their energy bills through providing practical help with energy efficiency and household finances, and financial wellbeing app Wagestream, which is subsidised by employers and enables workers to manage their budgeting, choose their own pay cycle, and access deals on financial products.
Local renewable projects have also received substantial social impact investment – for example, Big Society Capital had by 2020 alone invested in projects accounting for more than half of UK community energy generation using solar or wind.
These include Community Owned Renewable Energy LLP (CORE) – a £40 million investment programme which helps purchase solar farms, with the long-term aim of turning them into community-owned assets.
In 2021 alone, around £1.6 billion of investment was committed across approximately 1,300 investments.
Social and affordable housing funds, which aim to provide safe, affordable homes for tenants who might struggle to access mainstream housing such as women fleeing domestic abuse, continue to account for the largest segment of the total market at £3.8 billion.
Social lending – which is generally used by social enterprises, trading charities and community-based enterprises who struggle to access mainstream finance – is the second largest segment at £3.3 billion.
Sarah Gordon, Chief Executive at the Impact Investing Institute, added: “There has never been a greater need for social investment in the face of the cost-of-living crisis and the climate emergency. It is therefore very encouraging to see the growth in the market that this report demonstrates.
“Now we need to see greater collaboration between government, institutional investors and social investors so that different sources of capital can work together more effectively to reduce regional inequalities across the UK, and deliver positive social and environmental impact as well as a financial return.”
More information about this research is available on the Big Society Capital website.