Impact on the market

Impact on the market

A series of recent government initiatives in the UK have aimed to connect investors to charities and social enterprises so they can grow their positive impact on society. 

This builds on a long history in the UK of socially conscious investing.  As part of these initiatives Big Society Capital was launched in 2012 with investment from dormant bank accounts and four high street banks. At the time the social investment market was still relatively small and dominated by secured lending, with sub-scale intermediaries who were reliant on investment from government and foundations. 

In this section we outline how the social investment market has developed since 2012 and highlight some of the challenges that still remain.  

annual deal flow versus £213m in 2011/12*

annual non-bank investments in 2016 versus £47m in 2011/12*

of our investments have been in start-up intermediaries, teams or products

match on our investments

Daniel Brewer, Managing Director, Resonance

"Resonance started back in 2002 with a mission to connect investment capital with transformational social enterprise. Over that 15 years we have stuck to that mission,  and found new ways to deliver it more effectively. There’s still a long way to go, but in the last five years we’ve gone from having no funds under management to creating and managing 7 funds worth £150m, from a team of 3 to a team of over 30, and from one office to five.  Along the way, the partnership of key investors like Big Society Capital has been essential to this growth."

We have helped increase the money flowing from investors to charities and social enterprises to improve people’s lives.

  • Annual deal flow of £595 million, versus £213 million in 2011/12 – annual growth rate of 28%
  • Overall £2 billion outstanding by the end of 2016, versus an estimated £800 million in 2012
  • Over 3,500 social investments, of which approximately 810 were in 2016

Social investment is not a single market or product so we work closely with partners to develop solutions that provide different types of finance to meet the different investment needs of charities and social enterprises and investors. We have aimed to find the appropriate balance of supply and demand in each of the many sub-segments we target, to grow the market and not be the market.  


We have helped develop a broader mix of repayable finance products to better match the needs of investors and charities and social enterprises.

  • Annual investments in non-bank products (beyond secured loans) has gone from £47 million in 2011/12 to £291m in 2016*, an increase of 6x
  • As a result, investments from social banks have declined from 77% of deal flow in 2011/12* to 51% in 2016.

Additional non-bank products available to investors and charities and social enterprises today include charity bonds, property funds and community shares.  Challenges remain in trade-offs between producing returns to attract investors and the riskier products demanded by charities and social enterprises.  Initiatives we have supported such as Access – the Foundation for Social Investment and Social Investment Tax Relief aim to bridge this gap.  


As a wholesaler, our focus is on identifying high potential intermediaries who can provide appropriate capital and support to charities and social enterprises.

  • Over 75% of our investments have been in start-up intermediaries, teams or products.  Many investors are reluctant to invest at this stage so we aim to help intermediaries establish a track record
  • There are now seven fund managers with over £50 million in social investment assets under management (versus one in 2012)

As an early-stage intermediary investor, post-investment support is crucial. We have developed our Building Blocks, a framework to identify best practice and scope sector-wide solutions to common challenges faced by intermediaries in areas such as governance, financial management, and impact measurement. Challenges remain, especially with the margins available to those intermediaries who arrange deals.


We have aimed to widen the pool of co-investors by engaging with them, helping to develop appropriate products, investing our money alongside them and tackling regulatory barriers.

  • 2.3x match ratio on our investments, with the majority from private sector sources including pension funds, banks and individuals
  • All of the five largest UK asset managers are actively developing social impact products, versus none in 2012
  • 110 trusts and foundations now in the SIIG, which we help convene, versus 25 in 2012

Our co-investors often bring great knowledge of social issue and investment areas, such as the Joseph Rowntree Foundation for our work on the poverty premium.   We also use research to better understand the potential of future impact investor groups such as corporates, social pensions and retail investors. 

We advocated for Social Investment Tax Relief to encourage risk-taking investment from individuals into charities and social enterprises, and have worked with fund managers and financial advisers to encourage uptake of the relief. Since the relief was introduced, there have been almost 50 deals worth over £5 million.

Challenges remain on creating simple investment structures that make social investment easily accessible to a broad range of investors.


We have helped develop a broader mix of social investment products

We have invested £27.5 million in Charity Bank and Unity Trust Bank to grow their investments into charities and social enterprises.

In addition, we have invested significantly to make riskier non-bank lending more widely available:

  • £30 million to grow existing lenders such as Big Issue Invest, Key Fund and Social Investment Scotland
  • £40 million to establish new national social lenders such as SASC, and regional lenders such as NESIC who focus on the North East of England
  • £22.5 million committed to Access’ Growth Fund, which alongside funding from Big Lottery Fund will organisations to access small, flexible and unsecured loans below £150k

Ongoing challenges exist in balancing pricing to attract investors and affordability for social impact revenue models.


Charity bonds can provide lower cost funding for larger projects, as well as an additional route to engage with supporters. The charity bond market has grown from £2.4 million in 2012 to £121 million by the end of 2016. We have:

Ongoing challenges exist in bringing down the cost of smaller issues to increase the range of charities who can access investors through bonds.


Social impact bonds (SIBs) enable investors to share the risk of outcomes-based contracts with charities and social enterprises that are able to test new approaches.  Bridges Fund Management have also found that outcomes contracts can help improve existing services, align incentives across policy areas and coordinate multiple stakeholders on complex issues. 

There are also alternative models developed to finance outcomes-based contracts, including Social and Sustainable Capital’s risk sharing investment with Family Action.

The market continues to develop with 33 social impact bonds or £36 million. We have:

Social impact bonds so far remain a tiny part of the broader outcomes commissioning market. Ongoing challenges include engaging commissioners in developing social impact bonds due to pressures on their time and a lack of available resources. 


Where social enterprises can take on equity, it can be an effective way of financing long-term growth.  We have invested in the growth of equity-like capital through:

Availability of long-term co-investors remains a challenge, as identified more broadly in the UK’s recent Patient Capital Review.


For many charities and social enterprises, property is a significant part of service provision, but direct ownership is not always possible or suitable. Social property funds can be a solution, and have invested over £200 million by 2016 compared to zero in 2012.  We have catalysed this market through:

There is significant investor interest in property funds, but some tension remains between returns and the higher impact models.


Advances in crowdfunding technology have made it simpler for charities and social enterprises to directly access retail investors.   Community Shares are a notable success story, with 120,000 people having invested £100 million to support 350 community business since 2009.  We also advocated for Social Investment Tax Relief to encourage more individual investors to make social investments.

We have invested:

For crowdfunding to continue to succeed, greater accessibility must be balanced with appropriate information on risks.


What next?

We define social investment as being into charities and social enterprises with an objective to achieve both financial and impact returns. We were established to grow the social investment market, and therefore this section has only focused on data from that market to evaluate our impact. In reality though we work frequently with other purely financial investors in charities and social enterprises, making the most of this capital where it is available. We also contribute to a broader movement including impact investing and responsible investment, which may include investment in to private companies.

We think it is likely the definitions between market areas are likely to become increasingly blurred over time.  Nevertheless, our new strategy continues to focus our capital on growing investment into the area where we see the greatest opportunity to improve lives, which is impact driven investment into charities and social enterprises.

The social investment market has developed significantly over the past five years, from our activities and the vital contributions of our partners. Our first strategy aimed to grow a broad market to better connect capital to social need. Our new strategy, launched in July 2017, will aim to deepen the market in the areas we think have the most potential for social investment to improve lives.    


Market failure to market creation - We received over 200 expressions of interest in our first year, of which only a handful progressed to investment as very few had experience, sustainable plans and/or intent to create impact. Given the nascent market, we have been unable to rely on incoming proposals as planned. Instead, we have had to move to the other side of the table to actively develop proposals alongside partners. In our first two years we only made £48m of investments, over the next three years (2014-2016) we made £292m of where the majority came from programs and proposals we developed. 

From product focus to social issue and revenue model - We started in our first year overly focused on the financial product as the answer. We have learnt that all our work needs to start with the social issue and the revenue model that will aim to address it. We have then aimed to broaden the range of available social investment that best supports and grows those revenue models. 

Segmenting our market vision - Our initial decision making was too complex as we tried to get every project or investment to live up to every objective. Our strategy helped define differing market development visions alongside the impact we aimed to achieve and helped us make better decisions in each area.

Disrupting ourselves - Our mandate to find the best ways to connect capital to impact means we have learnt we need to actively disrupt existing investments, which can take a bit of getting used to both for us and our investees.  For example we will invest in crowdfunding sites that are aiming to disrupt our existing debt funds and will support multiple competitors.

Leading when needed - We were set up to grow the market not be the market, to build the capability of intermediaries above all. But, there are some areas where we were too slow to lead where it was needed for market growth. One of these was data and market information, we now coordinate market data and built Good Finance with partners.

Building development partnerships - There is a group of partners who are absolutely crucial to what we do. They tend to have in-depth knowledge of the social issue, broad experience of what's possible and the capacity to co-invest in risky untested proposals. We have learnt building enduring relationships with these key development partners is vital to our work. We can improve how we adapt our approach to different partners and when/how we bring in broader social sector input.

Listening deeply - Any significant funder needs to work hard not to hear the echo of its own voice. We have learnt we need to listen harder when working with all our partners, including allow many of our assumptions to be tested. For example some of the assumptions in our investment committee on poverty led to challenging conversations on financial inclusion investments. We invited Juila Unwin from JRF to come to talk to us on poverty which led to us working together to try and abolish the poverty premium in the UK.  We feel we have ongoing work to do in this area.

Prizes can break inertia - For two years we knocked on the doors of FTSE 350 companies offering to co-invest with them on social investment, we had significant interest but little movement. We then launched the Business Impact Challenge, with a high profile panel, where the prize was...our co-investment. We received multiple high-quality proposals and had a significant step up in dialogue.

Better strategic prioritisation with government -  Government is our most significant partner, but in many cases can have shifting priorities and a shorter time horizon. The majority of projects we have spent time developing with government have not happened, but many important ones have (such as £100m Access and £80m Life Chances Fund). We have learnt to temper our excitement on possible scale of impact and adjust our work to likelihood of success.

Being trilingual - We have learnt to be an effective social investor you need to be equally comfortable in the languages of the social, government and financial sector. We now actively hire and develop teams to do this, and have found innovation and quality execution flows best from teams that are truly trilingual.

Social needs sharper thinking - It was recently said that impact investing can be an excuse for good people to do bad deals.  We have learnt given the multiple objectives impact thinking requires more (not less) structured thinking and process than conventional investing.

Building clear and proportionate processes - While social investment requires sharper thinking, it needs to be proportionate to the task at hand. We have learnt we need to say no as early as possible when dealing with stretched and under-resourced intermediaries, bringing strategic decision making before performing due diligence. We have also learnt we need to get better at adapting our investment and legal process between larger transactions where we hope to attract significant institutional capital, and smaller pilots with key partners. We still need to improve in this area.

Adaptability of leadership - We have learnt that one of the greatest success factors of social investment leaders is adaptability to what's possible. We see the most successful social investors combining deep understanding of both investor and charity and social enterprise needs, with an entrepreneurial understanding on how to shift their business to deploy capital for impact. By contrast the less successful will often get stuck on considering the barriers they face.

Building a learning culture - We understand we are early in our learning journey, and given the complexity of the multi-sector markets we work in, building a learning culture is vital.  We have built a Social Investment Development Framework for our staff, a Learning Database and a Social Investment Manual.  We learn most from our partners, intermediaries and other organisations.  Most of our team sit on the ICs of our funds, volunteer regularly and sit on the boards of multiple charities and social enterprises.

Developing wholesale tools - We started overly reliant on investing through private-equity style structures. We have developed further wholesale finance tools that will bring in capital, such as developing a support fund for new charity bond issues, a co-investment facility to help Charity Bank make larger loans, a bridge fund to renewable community share issues, a blended facility with Access to enable smaller loans and a match fund to grow SITR on crowdfunding sites.

Flexibility to market conditions - In trying to connect capital to social issues we have learnt to adjust to market opportunity. For example, we have prioritised community renewables and social property as low index-linked gilt yields provided a relative value opportunity to attract significant capital to these areas. We have also learnt to stop earlier projects that are getting little traction with co-investors.

Moving complexity to the middle - Successful financial innovation moves complexity to the middle over time, away from the end-investor and/or enterprise, think of ETFs or crowdfunding. In social investment, RCB plc has done this through creating an issuance shelf which reduces cost and complexity for charities to issue charity bonds. We have been less successful so far in standardising innovation and moving it to the middle in other areas such as social Impact bonds.

Structuring in familiar packages - While structural innovation is sometimes needed, where familiar structures are appropriate they will attract co-investors fastest. Examples include our cornerstone investments in Columbia Threadneeedle's Social Bond Fund and Cheyne's Social Property Fund, both which have gone on to raise over £100m.

*The comparisons in this report between 2011/12 and 2016 have been updated since this report was first published in July 2017. We have provided a description of how the two market estimates were compared.