Compendium gives bird’s eye view of the social investment market

Information drives the smooth operation of all markets. It is needed to establish prices, understand the role of different participants, assess underlying trends, and spot opportunities. For new and emerging markets, information can often be patchy, and this is certainly true of social investment.

 

Today, Big Society Capital is publishing a Social Investment Compendium - one step towards closing the information gap in the social investment market. It is an attempt to bring together key pieces of research and information from across the social investment market into one place, and to think more systematically about the four areas that make up the market: products and intermediation; social sector demand; social investor supply; and the broader enabling environment.

 

Although it is far from an exhaustive collection of everything that could be known about social investment, we hope it makes it easier to get a bird’s eye view of the market and helps newcomers get quickly accustomed to how the market operates. 

 

So what does it tell us about the development of the social investment market?

 

To start with, there are several reasons for optimism. The market has grown to £202 million, with increasing engagement from potential users and suppliers of social investment. More than half of charities are now interested in understanding if social investment could help them to grow; and at the same time new investors, particularly high net worth individuals, are showing signs of entering the market. Set against the positive developments in the broader environment, like tax reform, there are clearly reasons for confidence.

 

But there are still big challenges ahead in developing the social investment market. For example, there is not the diversity of products and supply in the market to meet the needs of the variety of social sector organisations that could benefit from using social investment. In particular, secured lending continues to dominate the products on offer, with an overwhelming 90 per cent of the market, and frontline organisations struggle to access patient risk-taking capital and small deal finance. In addition, traditional pioneer financiers of social investment continue to shoulder the bulk of the financing burden; and the broader finance sector still lacks a deep connection with social investment. These are reasons to stand up and take notice.

 

Finally, there are some clear areas of opportunity that are emerging. These are not only in sectors that we have previously noted, such as health or community assets, but also new pools of potential investors. Local authority pension funds, housing associations, and possibly even university endowments could be ripe for bringing into the social investment fold.  

 

At Big Society Capital, we’re using the Social Investment Compendium to help influence our decision making, as well as better understand where more research and information is needed. If you’d like to share with us your views for key priorities for the social investment market, we’ve set up a simple response tool here.  

 

By thinking holistically about the market in this way, we hope we will be able to increase the knowledge and confidence that is needed to support the growth of the social investment market, and ensure it is fit for purpose: providing the capital that is needed for organisations tackling some of our biggest social issues.