Social investment bank Big Society outlines first investments

by Astrid Zweynert | azweynert | Thomson Reuters Foundation
Thursday, 13 September 2012 17:00 GMT
World's first social investment bank says it is on target to make investments of around 50 million pounds by end of 2012

LONDON (TrustLaw) – Big Society Capital, the world’s first social investment bank, on Thursday announced investments worth 37 million pounds as part of its drive to grow a market for investments linked to socially desirable outcomes.

Big Society Capital Chief Executive Nick O'Donohue said the bank was on target to make investment commitments of around 50 million pounds by the end of 2012.

He told BBC radio that the bank "is clearly going to be substantially cheaper than commercial forms of finance", adding that lenders are seeking to balance financial security with making a social impact.

Big Society Capital said it had made commitments to 12 organisations out of 130 that applied since it was launched in April.

The two biggest investments were each of 10m pounds, Big Society Capital said.

The first went to the Results Fund, which provides finance for social sector organisations competing for government “payment-by-results” contracts, including through social impact bonds.

The second went to Impact Ventures UK Fund, managed by LGT Venture Philanthropy in association with Berenberg Bank, which provides growth capital for social enterprises.

Big Society Capital’s investments back social finance intermediaries that in turn directly fund social enterprises or infrastructure.

Separately, the Boston Consulting Group (BGG) said in a report that demand in the social investment market in England could reach 1 billion pounds by 2016, six times what it is today.

In a first attempt to establish the future size of the social investment market, BGG found that more government contracts, private consumer spending, and corporate social investment will be directed toward charities and social and community enterprises than ever before, and as a result, the demand for capital in the social sector could grow at 38% a year. 

"Social investment is clearly a market ready for growth,” said Adrian Brown, principal at The Boston Consulting Group who led the BCG research. “There is increasing interest from commercial and other investors, and growing demand for capital from social organisations. “

A second report, just published by the International Centre for Social Franchising, showed how some of this demand will come in the form of social franchise models, providing new opportunities for both investors and social enterprises.

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