Can you outline your approach to social impact investing?
At Big Society Capital, social impact investing means deliberately seeking a measured, deep and lasting positive social impact. That means not just screening out companies that might have a negative impact on society, but looking for specific positive outcomes.
Over the last decade, we have learned what works when ideas, investment and expertise are united. With this in mind, since last year we have been focusing on four key investment areas that can make the biggest difference.
These include social and affordable housing funds – which now account for the largest segment of the UK social impact investment market at £3.8 billion ($4.1 billion; €4.3 billion), with the funds we support alone providing a projected 8,500 safe and affordable homes. We also back impact venture funds, which have now supported 10 million people through 200 start-ups, tackling social issues such as mental health and financial inclusion with technology. The final two areas are social lending and social outcomes contracts.
What do you look for in an impact fund manager?
Across all asset classes, we assess proposals against four dimensions: how the proposal delivers a positive impact on people’s lives; the systemic change it may help create; the financial/risk return profile; and the team’s ability and values alignment. In venture, we are looking for fund managers that have the potential to be excellent partners to impact start-ups – bringing both a commercial scaling skill set and an impact mindset.
There are three indicators we assess: do they have a compelling strategy for delivering strong impact and financial returns; are they able to demonstrate an edge in executing that strategy; and have they repeatedly applied that edge in a high-quality way.
How do you engage with fund managers following an investment?
We aim to be active and valuable partners for fund managers. In venture, this often involves hands-on support around impact – from helping set fund impact goals, to advising on strategies for sourcing and assessing impact investments, through to managing impact investments to maximise their impact and commercial potential.
We often spend time with impact companies in our fund managers’ portfolios in order to work through similar questions with the founders and management teams interested in impact. In addition, we look to be supportive in some of the more conventional ways fund managers look to their LPs, such as facilitating connections with like-minded investors and experts in our network or serving on limited partner advisory committees to provide input on wider strategic questions.
Big Society Capital turned 10 this year; how has the social impact investing market developed over that time?
Social impact investment has a long history and has existed in some form for hundreds of years; however, it is now growing more quickly. For example, our latest figures show the UK market grew from £830 million in 2011 to £7.9 billion in 2021.
Big Society Capital’s model has been emulated across the planet, in places like Australia, Japan and South Korea. We look forward to continuing to work with partners across the sector to scale the positive impact created by the market for more communities across the UK at a time when the need is greater than ever.