Big Society Capital: Fostering the Social Investment Market

Big Society Capital: Fostering the Social Investment Market
Big Society Capital: Fostering the Social Investment Market

Big Society Capital touts itself to be an independent financial entity with a social mission. The organisation aims to help to increase the social investment market in the UK. Tackling difficult issues such as youth unemployment, homelessness and financial exclusion, the organisation helps to find affordable and repayable finance to help them to meet capital needs. This helps them in turn to be able to increase their efforts and deliver enhanced outcomes. The way that Big Society Capital achieves this is by:

“Building a divers social investment market: encouraging investors to lend or invest money to achieve a social as well as a financial return.”

Big Society Capital has a vision of a “vibrant, diverse, well-capitalised and sustainable social investment market” in the United Kingdom. Through this social enterprises and charities should be able to access financing to increase the impact that they have on society and deliver positive outcomes.

The organisation’s mission is twofold. As an investor its goal is to transform the social investment market and attract more sources of investment to provide affordable capital within the social sector, as well as financial and business support services. It also sees its role as being a champion of social investment overall. In working towards this it aims to encourage best practice and sharing information, raising awareness of the social sector and social investment. It also seeks to develop the ties between the traditional financial markets and the social investment sector. Last but not least, it aims to place social impact assessment within the investment decision making process.

The organisation receives part of its funding from dormant bank accounts. This is achieved by working with Reclaim Fund Ltd which gathers money from UK banks and building society accounts that are inactive. It is anticipated that the organisation will receive as much as £400 million from this source. Reserves of this money are held to make sure that any future claims can be covered, and after that the money is passed to the Big Lottery Fund which divides up the money between the home countries. The English portion goes to Big Society Capital. Additionally the four major UK high street banks provide some of the funds. They give an amount that is the same as 60% of the amount given by the Reclaim Fund. Over a five year period the contribution is limited to £200 million, but this is still a very sizeable amount.

Big Society Capital invests in social investment finance intermediaries. These have to be UK entities and they have to have a purpose of providing investment to social sector organisations that work to benefit individuals and communities in the UK.

Those that are invested in are likely to have solid management teams and robust corporate governance systems. They have a strong business plan and good financial models with justifiable assumptions underlying them. Equally important, they have to have a clear social mission and ways for monitoring the social impact that they have. Areas of focus are on organisations that offer investment and support to those operating in the social sector, particularly in the areas of employment, training and education, housing and facilities, income and financial inclusion, physical health, mental health and wellbeing, friends, family and community, citizenship, arts, heritage, sport and faith and conservation of the natural environment.

In looking for appropriate social investment finance intermediaries to invest in, Big Society Capital places great emphasis on making sure that social value is maximised. It also aims to invest in organisations that offer financial sustainability, and it aims to build the social investment market overall.

An additional role that the organisation plays is collecting research and information on the social sector. The goal of this is to develop a common platform of knowledge, to develop best practice and understand what works best in providing social impact. This is important and considered to be helpful by Big Society Capital in raising confidence in the idea of social investment. It also helps to build awareness at the same time. There are reports on the organisation’s website that are helpful in understanding these different areas, and which will undoubtedly increase knowledge of this important sector in the UK market.

Overall, Big Society Capital is making a big difference in social investment, and is changing lives for the better.