Social impact investment in the UK will reach £10bn in calendar year 2023, up from £9.4bn in 2022, according to the latest market research by Better Society Capital. This is the slowest annual growth since at least 2016.
According to the 2023 Market Sizing published today, the size of the social impact investment market has grown by 7% since last year – a sharp slowdown in growth from 2022, when the social investment market grew by 18% compared to 2021 figures. in 2021 the market grew by 21%.
Stephen Muers, managing director of Better Society Capital, said: “We tend to take a longer-term view of overall market development rather than grinding out years in isolation. Over the past three years, the UK social impact market has seen positive growth of 15%. We see this year’s figure continuing the positive trend .
However, the figures meet Better Society Capital’s target of growing the social investment market to between £10bn and £15bn by 2025, and the continued growth of the market (which was 12 times larger in 2023 than in 2011) is seen as a reassuring sign. .
Stephen Muers, managing director of Better Society Capital, said: “It is encouraging that the market has continued to demonstrate stability despite economic uncertainty and to see continued investment in addressing social issues – including child poverty, homelessness and the impact of long-term health problems.”
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. .
What is social impact investing?Better Society Capital defines social impact investing as follows: “Investing in social organizations such as charities, social enterprises and impact startups, or in real assets such as social and affordable housing. The investment enables them to deliver products or services that create measurable, sustainable social impact that improves people’s lives. Social Impact Investors aim for positive social impacts as well as financial returns, and both the investment target and the investor show an intention for social impact.” Source: 2023 Market Sizing, Better Society Capital |
The drop in growth wasn’t entirely unexpected: last year, Muers warned that the financial situation in 2023 was “tighter” than in previous years – with fundraising becoming more difficult across the board due to investor caution, further rising interest rates and general uncertainty.
“These are headwinds that affect all investors, and the societal impact is no different,” Muers told the Pioneers Post at the time. “I definitely think we’re not necessarily going to see growth at that level.”
The slower growth is largely due to stagnant investment in the largest segment of the market, social and affordable housing, which is flat at £5.1bn in 2023 – after growing by more than 30 per cent a year for three years. consecutively and sometimes compensating slower growth with other segments such as social loans or impact projects.
Some segments performed better than last year, with social lending growing 16 percent year-on-year in 2023, up from 6 percent the previous year.
The report claims that social and affordable housing proved more resilient than the wider property market, which remained sluggish in 2023 due to high interest rates and inflation.
Source: Better Society Capital, 2023 Market Sizing
Type of investor
The market research examined the composition of investors in the market for the first time – based on a sample of 1,000 social investors. This showed that pension funds provide more than a fifth of social investment, which is mostly directed towards social and affordable housing, followed by trusts and charities, which provide 14 per cent of capital invested in social investment.
The budget in the center
Ahead of the UK government’s release of the budget later this month – which is expected to announce funding cuts across departments – Better Society Capital is taking the opportunity to publish the report to urge the government to make use of social investment.
Muers insisted that solving emerging social problems, however, will require much more capital: “The social issues that need solving show no signs of abating… These are big challenges that require much more than the current £10 billion market, which is why we are calling on the government to get involved with investors to shape policies that can grow existing capital significantly in the coming years.”
He said social investment could support the government’s plan to boost economic growth. “We hope that the growth in the size of the social investment market is a sign of an opportunity to harness innovative sources of funding for government,” he said.
“With the Labor government’s focus on growth, we have a unique opportunity to transform capital-increasing policies into impactful projects that benefit society, lighten the treasury and support the economy.”
Civil Society Minister Stephanie Peacock said the government looked forward to “championing a growing investment sector that harnesses our country’s innovation and entrepreneurship and steers it towards the common good”. However, he has not said how or when the government planned to do this.
This reflects a lack of detail that many chapters in the social impact field have recently highlighted A message from the pioneers the government’s intervention in the sector’s support plan.
Also on the social investors’ radar is upcoming new funding from the Extended Dormant, which will make £87.5m available to social investment wholesalers (ie Better Society Capital and Access Foundation for Social Investment) between 2024 and 2028. The money is delayed. with the change of government and related administrative processes, is expected to be ready by the end of this year, according to a person close to the matter.
Muers said: “Future dormant asset allocations will be important in supporting growth and in particular in helping the market achieve full impact potential. The use of board assets to support social investment has been a significant success and we hope to see this replicated with more sharing based on the existing strong track record.”
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UK social investment in 2023
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Top image: Social investor Bristol & Bath Regional Capital funded the construction of The Elderberry Walk – 61 sustainably built houses that benefit society by combining lower rents for key workers, ethical market rents and rental housing.
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