Long-term social investment to boost British economy

As Brexit looms, competing voices continue to argue about Britain’s economic fortunes for the year ahead. Yet there is optimism about brand new solutions to long-standing problems, as 2017 is set to become the year social investment goes mainstream.

The UK government certainly believes so. Ministers have announced a plan to help more people make financial investments that have a positive impact on the world this year – whether that’s done by addressing poverty, environmental problems, or lack of inclusion and opportunity.

Rob Wilson, Minister for Civil Society, said an advisory group would look at new ways to get more individuals and institutional investors involved in society-changing ventures. “I’m convinced that people want their investments to do good, as well as making a financial return,” he said.

Big Issue Invest – the social investment arm of The Big Issue Group – has led the way in this field for over a decade now. Launched in 2005, Big Issue Invest helped kick-start the sector and grow the relationship between big investors and social enterprises with bright ideas.

It’s become clear there are a huge number of social organisations across the UK with a strong track record, buzzing with great ideas

“There’s a real movement building now,” said Daniel Wilson-Dodd, head of lending at Big Issue Invest. “There had previously been a feeling among some investors that there weren’t enough strong, achievable ideas out there to actually invest in and get a return on.

“But it’s become clear there are a huge number of social organisations across the UK with a strong track record, buzzing with great ideas, and they are now finding investors willing to back them. It means more social enterprises should be able to get the finance they need to make a difference in their community.”

One of the leading vehicles that pairs up these investors with the charities, social enterprises and companies raising capital for projects with clear social benefits is the Threadneedle UK Social Bond Fund. Based on a partnership between Big Issue Invest and Columbia Threadneedle Investments, it is one of the ventures the government’s advisory group will be looking at for ideas.

Big Issue Invest also expects to launch an “outcomes” investment fund, allowing investors to back organisations that have agreed to meet a very specific set of goals – whether it’s getting a certain number of houses built, or a certain number back into work.

Big Issue Invest’s groundbreaking Social Enterprise Investment Fund I (SEIF I) provided finance to social enterprises and charities working in education and employment training, health and social care, and those tackling homelessness and financial exclusion. As a result of the fund, almost 1,000 vulnerable 18 to 24-year-olds moved into stable accommodation, and over 4,000 children received a high-quality nursery education.

Big Issue Invest extends The Big Issue’s mission by supporting social enterprises and charities which dismantle poverty and create opportunity

The fund also allowed charity Thames Reach to deliver the Ace Project, which supported hundreds of hard-to-reach rough sleepers as they moved into temporary or settled accommodation.

Building on the success of SEIF I, SEIF II has already committed around £6m to social enterprises and charities seeking to deliver change on a larger scale, and expects to close out fundraising at £30m in the next few months.

A growing number of financial backers are beginning to realise no trade-off is necessary between making a positive difference to society on one hand and making a healthy financial return on the other. A bigger impact on a community need not mean a smaller return. A recent JP Morgan study found that 89 per cent of investors making social impact investments found that their return expectations had been met.

In fact, JP Morgan has estimated that the UK’s social investment market will exceed a whopping £300bn over the next decade. And now that the government is exploring new ways to get the savings and pensions industry involved, there is optimism the market can grow even bigger.

“Big Issue Invest extends The Big Issue’s mission by supporting social enterprises and charities which dismantle poverty and create opportunity,” said Nigel Kershaw, chair of The Big Issue Group. Big Issue Invest now manages or advises on £150m of social funds.

“We’re creating the UK’s first social merchant bank – a bank by social entrepreneurs, for entrepreneurs,” adds Kershaw. “We invest in businesses led by socially minded entrepreneurs from all walks of life. We understand first-hand how good, smart businesses can do great things.”

GOOD MONEY

• Since 2005, Big Issue Invest has invested over £30m in more than 300 social ventures across the UK.
• In 2015-2016, Big Issue Invest directly made 60 investments totalling almost £10m.
• The new Impact Loans England scheme is available to social enterprises and charities looking for finance of between £25,000 and £150,000.