Bringing Social Investment Down to Earth

In their two hour presentation on The Investible Social Entrepreneur : Introducing Builder Capital (1) at Mazars, near Tower Bridge in London, on Thursday afternoon, July 10 2014, Helen Heap and Robbie Davison brought the whole UK Social Investment community, Cabinet Office included, down to earth. Most significant of all – as shown below – they gave a realistic estimate of the size of the UK Social Investment market, which wasn’t questioned by anyone attending.

Builder Capital is described in various ways throughout this excellent publication. Perhaps page 9 says it best. The Builder Capital Model describes:

“how an investment of the right sort of money at the early stages of a Social Enterprise’s development is crucial in enabling it to deliver social impact from the outset while working towards sustainability and the ability to deliver financial returns to investors”.

In other words, given the right kind of investment, social returns start early and financial returns come later. This involves continuing trust and contact between the investor and investee organisation throughout the whole period, which is usually longer than loans or grants.

On the size of the UK Social Investment market, one paragraph on page 54 says it all:

“Taking the UK as a whole that probably means the Builder Capital market is worth around £50-£60mn per annum, appromimately 25% of the current market size for social finance.

“We expect those who are successful in persuading investors to back them will secure Builder Capital amounts of somewhere between £250,000 and £2mn each”.

This projection of a total market size of £200mn to £240mn was a long overdue and refreshing change from some of the wilder previous forecasts of the UK total market for Social Investment, ‘Social Enterprises’ funded by Social Investment, Social Impact Bonds and private funding of up £3bn or even £5bn.

It was significant that during the launch meeting on Thursday 10 July 2014 nobody disagreed with this projection. No wonder that Danyal Sattar from Big Society Capital went even further and actually apologised for his delivery at last July’s similar event!

Some previous forecasts of the total UK Social Investment market are examined below.

Social Investment Market Forecast in December 2010

An early academic forecast was made in The Landscape of Social Investment in the UK (2) by Alex Nicholls of the Said Business School at the University of Oxford for the Third Sector Research Centre in December 2010:

(p8)“However, a rough calculation can be made based on the following: social equity investment (ie. share issues in UK social enterprises) (£50.1mn); the assets of cooperatives (£8.5bn); the annual turnover of social enterprises (£27bn); the annual turnover of cooperatives (£27.4bn); the assets held by venture funds aiming at social impact (£32mn); the assets held by social enterprise venture funds (£15.5mn); the assets held by venture philanthropy funds (£10mn); government procurement contracts to charities (£23bn); the ethical consumption market (£29.3bn); UK government funds committed to social investment (£572mn). This gives a total figure of approximately £116bn.

“Two further sources of capital may also be taken into account. The proposed establishment of a social investment wholesale bank capitalised by the dormant, unclaimed, assets held by UK banks would provide an additional source of social investment capital that is estimated to be worth in excess of £400mn. Finally, it could also be argued that it is appropriate to include ‘core’ SRI assets under management in the UK as part of the social investment market. If so, this would more than triple the figure above by adding in an additional £500bn”.

This generous forecast is significant since it gives the clue to some of the more misleading projections which follow. These often confuse the UK’s overall total capital requirement for all socially motivated and social purpose organisations with the small percentage of that total which might be filled by Social Investment.

Back to Top

Realism and Extent of Government Support – February 2011

Growing Social Ventures: The Role of Intermediaries and Investors: Who they are, What they do, and What they could Become (3), published by the Young Foundation and NESTA in February 2011, attempted to put Social Investment into a more realistic perspective:

(p7) “Social finance remains relatively small, with £192mn social investment compared with around £55bn of small business lending or £13.1bn of individual giving.”

Growing Social Ventures also outlined the previous extent of Government support for Social Investment:

(p31) “At least £350mn of public money has gone into social entrepreneurship funds, with the creation of UnLtd in 2001 (£100mn), the launch of CDFIs in 2003 (£42mn), the launch of Futurebuilders in 2004 (£125mn), and the Department of Health Social Enterprise Innovation Fund in 2009 (£100mn). More millions have come from other sources”.

Further perspective on the size of Social Investment was added in The UK Social Investment Market: The Current Landscape and a Framework for Investor Decision Making (4) by Cambridge Associates in November 2012:

(p3) “To date, demand for capital by social entrepreneurs/social enterprises exceeds the supply, as a limited number of impact investors are active in the market. In 2011 £190mn was committed to social finance investments”

(p5) “To give a sense of the relatively small scale of commitment by foundations, U.K. foundations have invested approximately £50mn in impact investments, while total foundation assets in the United Kingdom have been estimated at £78bn in 2010”.

These initial reports show that, despite significant public funding support under New Labour and the Coalition Government, progress in establishing and growing the Social Investment market was slow. Despite this, as shown below, more extravagant forecasts continued to emerge.

Back to Top

Despite this Realism, a £650mn Social Investment Forecast in November 2011

Lighting the Touchpaper : Growing the Market for Social Investment in England (5) in November 2011 by the Boston Consulting Group and the Young Foundation, initially offered some realism:

(p7)“Our survey found that total social investment stands at around £165m. Given the noise and excitement around the social investment market this is a surprisingly small number”.

“When compared with other sources of finance available to social ventures, £165mn looks very small indeed. For example, voluntary organisations alone had an income of £35.5bn in 2007/2008 on assets of nearly £100bn”

Despite this, Lighting the Touchpaper continued:

(p17)“Growth expectations in the market are high. 75% of respondents said they would expand current activities over the next three years and 44% said they would develop new activities. The average growth anticipated in funds under management was 35% p.a. with range 5%-160% p.a. This represents a £650mn capital requirement over the period”.

“If this vision is to be realised social investment will need move beyond a niche activity by creating new, high-quality investment opportunities; attracting more diverse sources of capital; and addressing some of the structural challenges in the market.

As before, this Report typifies the confusion between the real Social Investment market and more extravagant projections of a wider capital demand from all organisations with a social orientation.

Back to Top

Continuing Extravagant Forecasts in 2012 and the Reality of Big Society Capital’s 2013 Annual Report

The First Billion: A Forecast of Social Investment Demand (6), published in April 2012, by Boston Consulting Group and Big Society Capital, continued in extravagant mode:

(p8)“We found market participants to be bullish about the future. From around £165mn of social investment deals made in 2011, our study shows that demand for social investment could rise to £286mn in 2012, and then to £750mn in 2015, finally reaching around £1bn by 2016 if trends continue as forecast.

“This pace of growth, equivalent to 38% annually, is not for the faint of heart. Yet even at £1bn, demand for social investment will only be equivalent to the amount that charities borrow annually today from commercial lenders (by our calculations), or just over 1% of the market for small business loans.It is also a small fraction of the market for public service contracts. And it will amount to just one third of the £3bn that Big Society Capital hopes to ultimately inject into the market by leveraging its own £600mn reserves, though this is a cumulative figure”.

A further Report in July 2012 – only three months’ later – continued with these extravagant forecasts, despite its own massive survey evidence to the contrary.

Investment Readiness in the UK (7) published in July 2012 by ClearlySo, New Philanthropy Capital and the Big Lottery Fund, continued this same £3bn projection.

(p3)“With the establishment of Big Society Capital, combined with increasing interest from public bodies, grantmakers and philanthropists, there is a real prospect of an emerging marketplace for those who want to invest in social as well as financial returns. The loan portfolios of social lenders alone in the UK are now worth more than £500m and lending in general to the VCSE sector is in excess of £3bn”.

This conclusion was reached despite evidence from an extensive survey in the Investment Readiness in the UK Report, which represents one of the biggest surveys of the Voluntary, Community and Social Enterprise community undertaken:

(p12) “sent out to 7,420 UK voluntary and community organisations and social enterprises drawn from databases held by the Big Lottery Fund and ClearlySo….1,255 organisations completed the survey, which equates to a response rate of 17%….The response rate to the survey was very good, comparing favourably with response rates of other online surveys. This means that we can be more confident that it is representative of our survey sample”.

From its own survey Investment Readiness in the UK revealed in detail the difficulties ahead for building a Social Investment market in the UK:

(p9)“Conversion rates among social investors, (not including government-backed soft loan and grant funds) appear to sit between 5% and 15%21. At one extreme, Community Builders had 4000 enquiries leading to 200 applications and 37 investees – equivalent to less than a 1% conversion rate and thus a significant mismatch of perceptions between investors and applicants”.

(p32 )Just under half of those surveyed are not interested in investment. Those in this category are largely strongly against taking on finance that needs to be repaid to support their plans — only 8% agree that they would consider it. Three quarters feel that charitable money should be spent on delivery, not on repaying loans. The majority of organisations in this category are charities (over 80%) themselves. However, 70% of this group are interested in new ways of doing things and new ways of financing them but 63% agree that they are not able to generate the surpluses required to take on repayable finance. This suggests the majority are correctly placed into our category of organisations for which investment is not applicable.

The harsh reality and confirmation of the survey findings of the Investment Readiness in the UK report was shown in May 2014 with the publication of Big Society Capital’s Social Investment: From Ambition to Action: Annual Review, Report and Accounts 2013 (8) :

(p41)“In principle commitments of £92.5mn have been made during 2013. Since launching, Big Society Capital has made total commitments of £149.1mn. During 2013, one investment for £0.2mn has been sold, resulting in Big Society Capital having total commitments of £148.9mn for 30 investments at 31 December 2013. Of this total, 19 investments with a value of £47.9mn have been signed and £13.1mn has been drawn down. Big Society Capital’s expectation is that the average investment will typically take between 3 and 6 years to fully draw down. Alongside the signed investments made by Big Society Capital, £55.5mn has been committed by co-investors, taking the total value of capital available to the market to £103.4mn.”

Even allowing for any qualifications of a meagre £13.1mn drawing down of funds from Big Society Capital in 2013, the size difference between this – which shows drawing down of funds to intermediaries not to end beneficiaries – and the £3bn projection above of the total market is astronomical.

But, as shown below, Big Society Capital knew that it was heading for a hard landing.

Advance Warning of Big Society Capital’s Hard Landing

Big Society Capital’s Social Investment Compendium: Portfolio of Research and Intelligence on the Social Investment Market (9) presented in October 2013, as part of a very comprehensive overview on Social Investment, showed more down to earth estimates of its size made elsewhere:

  • £146mn in 2011 from CDFIs (JUST Finance, CDFA (2012))
  • £165mn in 2011 (Lighting the Touchpaper, BCG (2011))
  • £190mn in 2010 by UK Cabinet Office (Making Good on Social Impact Investment, Cabinet Office (2012))
  • £202mn in 2012 (Growing the Social Investment Market, GHK (2013))

This Social Investment Compendium of October 2013, presented by Big Society Capital, represents one of the most comprehensive descriptions of various aspects of capital market demands by socially-oriented organisations. Surely Big Society Capital must have noticed that other forecasts of Social Investment demand were much more pessimistic than its own?

Back to Top

Forecast Optimism Continues

Despite the harsh reality above, and Big Society Capital’s increasing revelations of its own difficulties, some optimistic forecasts continue, though lately these have been scaled back from earlier £3bn projections.

Marketing Social Investments – An Outline of the UK Financial Promotion Regime (10) by City of London Research Department in June 2014 is the latest:

(p7)“The Financial Promotion Regime is particularly relevant to the UK social investment market. Though 90% of lending to this market was in the form of secured loans in 2011/124, social enterprises are increasingly in need of unsecured debt capital. Projections by Boston Consulting Group suggest that by 2015, demand for investment into the market will reach £750mn, 58% of which will be in the form of unsecured debt and 15% in equity-like capital”

This City of London Research optimism is remarkable, especially in view of the caution expressed a year previously in its own Report.

In its July 2013 Report, Growing the Social Investment Market: The Landscape and Economic Impact (11) City of London Economic Research Department shows both the limitations and limited penetration for Social Investment. Though the Report showed that in 2011/2012 the UK Social Investment Market grew by almost a quarter to £202mn per annum through 765 deals, it also shows their high level of concentration:

“The development of the Social Investment Market is sparse and highly concentrated. The three largest organisations accounted for 81% of total investment (by value) in 2011/12, and seven organisations accounted for 91% of investment”

As a proportion of all Social Investment, this Report continued to show that 90% was for secured loans, mostly through social banks, and only 1% for Social Impact Bonds. All these Reports also show that despite considerable Cabinet Office funding and continuing publicity by Big Society Capital and Social Investment Financial Intermediaries, the concept of Social Investment is making slow progress.

Continuing Government Support

As might be expected, despite the limitations and slow growth of the UK Social Investment market, the Government itself continues in ever optimistic mode.

Growing the Social investment Market: 2014 Progress Update (12), published by the Cabinet Office and Minister for Civil Society, shows:

(p16)“In 2011/12, the market grew to £202mn over 765 investment deals. At a gross level, over the lifetime of their finance period, the 765 investments resulted in the creation or safeguarding of 340 social ventures, 6,870 FTE jobs, and £58mn in annual GVA contribution to the UK economy. We expect this to be the lower bound of the total size of the market”.

To encourage all of this, there is an ever increasing range of ongoing Government and Big Lottery support programmes, including the Investment and Contract Readiness Fund. Finally, the Government has also published a Social Investment Roadmap 2014 , which includes Social Investment Tax Relief. Additionally, there are further subsidies and support from Big Lottery and the Cabinet Office with Commissioning Better Outcomes and the Social Outcomes Fund. But none of this will generate or support the Social Investment market expansion in the extravagant projections made above.


Well done, Helen and Robbie. Though acceptance of the concept of Builder Capital make take another Government or two to gain understanding, in the meantime your biggest contribution has been bringing Social Investment down to earth.

As you said in your presentation, that’s how long Big Society Capital took to get up and running. Now we must surely argue for shifting their resources to deliver better results?

Back to Top


(1) Heap,Helen; Davison,Robbie The Investible Social Entrepreneur: Introducing Building Capital, July 2014, Seebohm Hill; Liverpool

(2) Nicholls,Alex The Social Enterprise Investment Fund (SEIF) Evaluation: The Landscape of Social Investment in the UK, December 2010, Third Sector Research Centre and Health Service Management Centre, University of Birmingham, Birmingham.

(3) Shanmugalingam,Cynthia; Graham,Jack; Tucker,Simon; Mulgan,Geoff Growing Social Ventures:The role of intermediaries and investors: who they are, what they do, and what they could become, February 2011, Nesta and Young Foundation, London

(4) Laing,Noelle; Long,Coleman; Marcandalli,Annachiara; Matthews,Jessica; Grahovac,Ana; Featherby,Joshua The U.K. Social Investment Market: The Current Landscape and a Framework for Investor Decision Making November 2012, Cambridge Associates, Cambridge

(5) Brown,Adrian; Norman,Will Lighting the Touchpaper: Growing the Market for Social Investment in England 2011, Boston Consulting Group;Young Foundation; London

(6) Brown,Adrian; Swersky,Adam; The First Billion : A Forecast of Social Investment Demand September 2012, Big Society Capital;Boston Consulting Group, London.

(7) Gregory,Dan; Hill,Katie; Joy,Iona; Keen,Sarah; ClearlySo; New Philanthropy Capital; Big Lottery Fund Investment Readiness in the UK July 2012, Big Lottery Fund, London

(8) Big Society Capital Social Investment: From Ambition to Action: Annual Review and Accounts 2013, May 2014, Big Society Capital, London

(9) Big Society Capital Social Investment Compendium: Portfolio of research and intelligence on the Social Investment Market October 2013
Accessed July 15 2014,

(10) City of London Corporation Marketing Social Investments – An Outline of the UK Financial Promotion Regime June 2014, June, City of London Corporation, London

(11)ICF GHK; BMG Research Growing the Social Investment Market: The Landscape and Economic Impact July 2013, City of London Economic Research, London,

(12) Cabinet Office Growing the Social Investment Market: 2014 Progress Update.
2014, June, Cabinet Office and Minister for Civil Society, London

Back to Top