The UK’s social impact market has hit the £10bn milestone in assets under management (AUM), as investors focus on supporting initiatives tackling child poverty, homelessness and long-term health conditions.
In analysis carried out by the Better Society Capital (BSC), data showed a 7% increase in social impact investment AUM from £9.4bn in 2022 to £10bn as at the end of 2023, the latest stats available in the firm’s annual assessment.
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Over the past 12 years the impact investment market has grown 12-fold, which BSC said it driven by an increasingly diverse group of investors. For 2023, BSC looked at investor composition for the first time based on over 1,000 investors in the data pool, and found 14 distinct investor groups contributing capital. The top investor groups across the market include pension funds, endowments and charities and asset and wealth managers. Pension funds provided 21% of investment, with the highest concentration in social and affordable housing. Endowments and charities are the second largest investor group, committing 14% of the investment. The groups cover a broad range of capital ownership from government bodies, including state-owned funds, through to private wealth.
BSC also found its own investments represent 5% of the market.
Stephen Muers (pictured), CEO of Better Society Capital, said: “It is a source of encouragement that the UK social impact investment market grew once again last year. However, we must not lose sight of the significant challenges ahead, whether that’s in housing, social inequality and the disparity in health and wellbeing across the UK.”
Budget
Ahead of the new government’s first Budget at the end of the month, BSC is calling for active partnership from government to unlock more social impact investment in communities across UK. The firm said in a statement the government’s focus on building a strong foundation for the economy includes “fostering innovation and investment in sectors that deliver both financial returns and social benefits” – aligning with social impact investment market’s goals.
As a result, the Labour government needs to consider the role of social impact investment and how it can support left-behind places.
Muers added: “As we look to the future, it is crucial for investors, businesses, and the government to work closely together to channel investment towards organisations that need it. With the Labour government’s focus on growth we have a unique opportunity to shape policies that encourage more capital into impactful projects that benefit society, ease the burden on the treasury and support the economy.”
Stephanie Peacock MP, parliamentary under secretary of state for the department for culture, media and sport, said Labour has a “proud history” in social impact investment with former PM Gordon Brown setting up the idea of impact investment from social bonds.
“As we set our priorities as a mission-driven government, we look forward to continuing this legacy by championing the growing impact investment sector, who harness the innovation and entrepreneurship in our country and direct it towards a common good. From assets of community value to cooperatives – we want to see more projects being funded where they are needed most,” she added.
