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September 13, 2012

Big Society Capital announces first £37m of social investments

By Spear's

New social investment commitments announced by Big Society Capital and City of London Corporation, as report reveals demand for social investment could grow to £1 billion by 2016

New social investment commitments announced by Big Society Capital and City of London Corporation, as report reveals demand for social investment could grow to £1 billion by 2016

Big Society Capital, the world’s first social investment bank, will today announce details of its initial investment commitments, totalling £37 million, since it was launched by the Prime Minister in April 2012. The announcement will be made at a reception hosted by The City of London Corporation, which will be an opportunity to brief City investors and financial services professionals about social investment and the role of Big Society Capital in supporting the development of the ground-breaking market in the UK.

Big Society Capital’s investments back social finance intermediaries that directly fund social enterprises or infrastructure for the market. (Details of the investment commitments are below.)

Big Society Capital’s CEO, Nick O’Donohoe said:

‘Big Society Capital has made significant progress since our launch and we are on target to make investment commitments of around £50 million by the end of 2012. The quality of commitments made so far is encouraging and they reflect diversity of investment type and by geographic region in the UK. The Guildhall event is an opportunity for City professionals to explore how they can further engage with this initiative.’

The announcement comes hot on the heels of two reports that paint an optimistic picture of social investment in the future. The first, from The Boston Consulting Group, finds that demand in the social investment market in England could reach £1 billion by 2016, six times what it is today.

In the first attempt to establish the future size of the social investment market, BCG 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.

A second report, just published by the International Centre for Social Franchising, shows 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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Adrian Brown, Principal at The Boston Consulting Group who led the BCG research, commented:

‘Social investment is clearly a market ready for growth. There is increasing interest from commercial and other investors, and growing demand for capital from social organisations. There is continued need for strong, positive action from donors, commissioners, investors and market intermediaries.’

The City of London Corporation will also be announcing its own £20 million social investment fund. The City of London Corporation Social Investment Fund (CoLCSIF) is a significant new fund which will play its part in building a thriving social investment market by making both direct and indirect investments. The fund has a principal focus on London-benefit but is also interested in opportunities across the UK and internationally.  

The City of London’s elected Policy Chairman Mark Boleat commented:

’The City of London Corporation see social investment as a vital way of financing the services delivered by charities and social enterprises. It can create better results and value for the public by unlocking the resources and skills of the financial sector. At the same time, this emerging investment category responds to an urgent question facing the City, which is how to put the word ‘service’ back into Financial Services. The City of London Corporation will therefore be announcing details of its own £20 million investment allocation towards the social sector at the Guildhall on Thursday evening. It is hoped that the rest of 2012 will see other city institutions following suit.’’

Mark Boleat will host the City of London and Big Society Capital event entitled ‘Harnessing Entrepreneurship and Capital Markets to address Social Issues’ at which the headline speakers will be: the Rt Hon Oliver Letwin MP, Minister for Government Policy Advice, Nick Hurd MP, Minister for Civil Society; Sir Ronald Cohen and Nick O’Donohoe, Chairman and Chief Executive of Big Society Capital respectively; and Adrian Brown.

The Cabinet Office is supporting the growth of the sector through various initiatives. These are outlined in the latest social investment strategy update document: ‘Growing the social investment market: HMG social investment initiatives’ (see Notes).

The key initiatives include a £10 million Investment and Contract Readiness Fund (launched in July by the Social Investment Business) and the £10 million Incubator Fund for early stage investment in social enterprises (to be administered through the Big Lottery Fund).

Minister for Civil Society, Nick Hurd, said:

‘We want to make it easier for charities and social enterprises to access capital so that they can do more. Britain is rightly recognised as a world leader in developing the social investment market, not least because of Big Society Capital. We want to build on that momentum by helping to create new investment opportunities’.

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