What are Big Society Capital’s key investment numbers for 2015?
Before getting straight to the point, allow us a brief meander. As our theory of change hopefully illustrates, we are ultimately trying to achieve greater social impact for disadvantaged groups, using social investment as a tool. Our investment activities are one part of this – we take our market championing role at least as seriously. So our investment numbers for any one year are just one means to a much broader end.
Nevertheless, these numbers are important and rightly attract scrutiny – that is why we have committed to more frequent and detailed reporting on our investment activity and portfolio as part of our transparency measures. And the most important number of all is the amount of front line social investment being generated.
By the end of 2015, £195m had been drawn-down by intermediaries from Big Society Capital and our co-investors to support charities and social enterprises.
This headline figure of £195m is driven by two important trends.
First, there has been a significant acceleration during 2015, as the equivalent draw-down figure for 2014 was just over half the size, at £104m. This reflects, we believe, the growing demand from some charities and social enterprises to take on social investment now that is more widely available and when it is appropriate.
Second, co-investors alongside Big Society Capital are continuing to provide significant amounts of investment. Of the £195m drawn-down by end 2015, £127m is from co-investors and £68m from Big Society Capital’s own resources. This reflects strong appetite among a surprisingly diverse range of investors (including for example local authority pension funds, housing associations, overseas investors, and retail investors) to look at and make social investments. We also think it reflects the active role we have played in working with other investors, many of whom would not have invested at all without Big Society Capital as a co-investor.
What sort of charities and social enterprises are benefitting? Looking at our own drawn-down capital, approximately 77% of capital has gone to charities or asset locked social enterprises like CICs or community benefit companies, 11% has gone to non-asset locked social enterprises and 5% has gone to social investment advisers like ClearlySo or Numbers4good (all of whom are social enterprises themselves). Finally 7% is accounted for in fees and costs – this is a cumulative amount over the last few years as funds are being set up - across our portfolio as a whole we are paying average management fees of under 2% a year.
What sort of social investment instruments are being used? Approximately 41% is enabling on-balance sheet debt and equity investments for charities and social enterprises (34% through funds, and 7% through social banks), 39% is property for charitable and social enterprise service delivery, 8% is social impact bonds, 5% social investment advisers, and 7% fees and costs.
Growing as it is, the £195m drawn-down from Big Society Capital and our co-investors only represents a small part of the wider social investment activity in the UK.
Firstly it does not include the additional social investment some intermediaries have been able to make as a result of Big Society Capital’s support of their operations. For example, our recent release of social investment deal level data shows that ClearlySo (in which we invested £1.2m from 2012) facilitated £7.7m of investments in the first 9 months of 2015 alone.
And it also does not include any of the activity of several other important lenders and investors outside our portfolio, whether other social banks such as Triodos or Unity Trust Bank, or specialist lenders such as Key Fund or Venturesome - who have lent to thousands of charities and social enterprises. Nor does it include the growing amount of individual investments via community shares or charity bonds. We hope other investors will add their own data to our deal-level feed in the future, so we can provide a more comprehensive picture of social investment activity in the UK.
2016 will see more significant drawdowns from Big Society Capital and its co-investors, and continued diversification in social investment as a whole.
We can make two predictions for the numbers we’ll see this time next year with a reasonable degree of certainty.
First, drawdown from Big Society Capital and our co-investors should accelerate further during this year. This is because there is now over half a billion pounds (£587m to be precise) of additional capital available at intermediaries just as a result of the 48 investments Big Society Capital has signed since inception. The equivalent figure was £359m for end 2014. The major investments we signed in 2015 include Big Issue Invest’s second Social Enterprise Investment Fund, Resonance’s National Homeless Property Fund, Social Finance’s Care and Wellbeing Fund and Salamanca’s Funding Affordable Homes.
Secondly, in 2016 the diversity of available social investment will continue to increase. We will see the launch of the first funds targeting smaller loans (sub-£150k) with the Access Foundation supported by the Big Lottery Fund. We expect to see more Social Investment Tax Relief (SITR) deals, hopefully helped by the launch of our Crowdmatch fund. Over 40 charities and social enterprises have pre-applied to use SITR, and we expect the maximum size cap to be raised significantly during 2016. Charity Bonds and community shares, which saw significant new issues in 2015, have a strong pipeline for 2016.
There will be some headwinds - there are big questions around the future of community-energy investments, and it will take a few months before the Spending Review announcements lead to more Social Impact Bond issues. But on the whole social investment continues to diversify its range of users, investors and products.
This blog is about some of our investment numbers, and we will update these again in mid-2016. But as we say in the introduction, numbers really are just part of the story. In the next few weeks we will be relaunching Big Society Capital’s website - with more information on our activities and the available finance from intermediaries - and in May releasing our fourth Annual Review. Both sources will have much more detail on the market championing role we have played in 2015 and continue to work on in 2016, and most importantly on the social impact being generated by the hundreds of charities and social enterprises we are helping support.