According to the latest market research by Better Society Capital, UK social impact investment will reach £11bn by the end of 2024, an annual growth of 12%, driven by the regeneration of social and affordable housing.
A record £2.1 billion worth of social investment was made across just over 1,100 stores in calendar year 2024, research published today reveals.
Stephen Muers (pictured), CEO of Better Society Capital told Pioneers Post: “We’re still seeing growth, and we believe it’s sustainable growth because the needs are still there and there are more organizations that can grow, invest more and make a difference… It’s not always a straight line – it’s always volatile and bouncing.”
Growth was largely driven by increased investments in social and affordable housing funds, which now account for 54% of the market. Outstanding investment in social and affordable housing grew by 18% year-on-year to £6 billion at the end of 2024, following stagnation in 2023. In 2024, the amount of capital invested in the sector increased by 27% compared to the previous year and was 1.09 billion pounds.
Muers said investment volumes in social housing were “naturally lumpy” because of the large sums of money involved in housing transactions, so it was important to look at longer-term trends, as fluctuations can be large from year to year. Excellent investments in social and affordable housing have grown by an average of about 16% per year since 2021.
Source: Better Society Capital’s interactive 2024 Market Sizing
Other segments – including loans to social enterprises and charities, investments in impact projects and social outcomes contracts – showed a mixed picture of slow growth or decline.
What is social impact investing?Better Society Capital defines social impact investing as follows: “Invest in social organizations such as charities, social enterprises, start-ups or real estate such as social and affordable housing. The investment allows them to deliver products or services that create measurable, sustainable social impact that improves people’s lives. Social Impact Investors seek positive social impact as well as financial returns, and both investors and investees demonstrate social impact.” |
Funding for new dormant assets ‘really important’
In a foreword to the study, Muers welcomed recent policy developments – the launch of the £500m Better Futures Fund, an outcome fund to support vulnerable children, and the newly created Office for the Impact Economy, a cabinet office as a “key point of contact” with government for social investors and purposeful business.
He said: “This development marks an important step towards aligning social investment with national priorities – from job creation and business growth to reforming public services and housing.”
Social lending – loans to social enterprises and charities – grew weakly in 2024, up just 6% on the previous year to £4.4bn. In 2023, the segment grew by 16%. In particular, non-bank lending, or debt financing, taken to provide organizations with working capital and growth financing, which includes mixed financing tools, grew by just 3% during the calendar year 2024.
Muers said that while “a few months ago it (the segment) was what we were worried about”, the recent confirmation of £87.5m of dormant asset funding for social investment to mixed finance wholesaler Access, the Foundation for Social Investment, put the segment in a “much stronger position going forward”.
That part of the market would be really stuck if that money hadn’t been released
“It’s really important because that part of the market would be really stuck if the money wasn’t released,” he added.
In brief: UK social investment in 2024
|
Impact projects: not immune to global headwinds
Investments in impactful startups, which represent 7% of the market, shrank in 2024, down 1%. Transactions in 2024 totaled £121m, matching the 2023 level.
This is because investor interest in impactful startups has decreased globally in recent years, following record high investments in 2021. In 2024, a study by startup data platform Dealroom found that capital investment in impactful startups had fallen by 20%. Dealroom expects investment in impactful startups to drop another 24% this year.
Better Society Capital says in its research that its data is a “conservative estimate” of the number of investments made in impact ventures, and notes that its ImpactVC initiative continues to generate interest, with membership growing to 750 since its launch in 2023.
Muers said the private equity sector was experiencing a “reset” after unusually high valuations in the broader venture capital market earlier in the decade, and was facing the same economic headwinds as the rest of the market. “Impact investing is caught up in that bigger picture, and it’s not immune to it.”
Social performance contracts: the story of the future
Outstanding investments in social outcomes contracts fell to £13.5m, less than 1% of the overall market, but the recent launch of the Better Futures Fund is fueling hopes that outcomes partnerships will flourish in the coming years.
“This is now the story of the future,” Muers said. “There have been no new funds or new investments in this area for a long time. The Better Futures Fund is a complete game changer.”
The Better Futures Fund is a complete game changer
But he cautioned against expecting spectacular gains all at once, because by nature social outcomes partnerships were a long-term process.
He said: “It’s showing up really slowly in this data because it’s quite a long period of time … so the capital flow is actually increasing quite gradually. So you won’t see this in the 2025 numbers. You’ll see virtually nothing in the 2026 numbers.”
In social outcome partnerships or contracts (also known as social impact bonds), social investors pay social enterprises or charities to deliver a service commissioned by public authorities. If the pre-agreed social results are achieved, the government pays back the investors with interest. The Better Futures Fund provides dedicated funding to repay investors when results are achieved.
Muers said today’s information was a way for Better Society Capital to look to the future as it developed its new 2026-2030 strategy, which will be announced in the coming months. “It’s great that we’ve passed that £10bn mark (its previous strategy target) and are now continuing to grow. But the next big question is where does it need to grow to have the biggest impact on the things that matter?”
Better Society Capital’s annual research is based on 100 different funds or social investment programs that meet the BSC’s criteria for social impact investing in the UK, including fund managers, brokers and social banks that make direct investments in social enterprises and charities, projects and properties.
Top photo: Emma Dodd (left) with her sister Aynsley. Emma is a new tenant at The Old Eight Bells, which opened last September and is funded by the Resonance Supported Homes Fund, which creates homes for people with developmental disabilities.
Create your own user feedback survey
| Are you ready to invest in independent, solutions-based journalism?
Our paying members get unlimited access to all of our content while helping to maintain our journalism. In addition, we are an independently owned social enterprise, so joining our mission means that you are investing in the cooperative and community economy. Consider becoming a member |