New research: How to scale social investment

2021-09-07T15:11:51+00:00 September 7th, 2021|Onward, Repairing our Social Fabric, Research|

This morning we publish How to scale social investment. Authored by Gareth Davies MP, the report argues we need to overhaul the UK’s social investment market in order to unlock new capital for businesses and projects that benefit communities and society.

Read the research

Ever since 2011, when the then Minister for the Cabinet Office, Francis Maude, launched the first “social impact bond” (SIBs) to reduce reoffending at Peterborough Prison, and created Big Society Capital, the British Government has sought to support the UK Social Investment market. However, investment has fallen well short of expectations.

  • Just £73 million has been invested in 87 ‘social impact bond’ initiatives against a target of £1 billion by 2020. Successive reviews have found that SIBs are complicated to set up, difficult to commission, and often require government or charitable foundations to underwrite some of the investment risk.
  • The main tax relief for social investment, Social Investment Tax Relief, has only been used by 110 social enterprises to raise a total of £11.2 million over the seven years of its operation, around 6% of the estimate when it was launched.

The report argues that this is because SIBs are not bonds (liquid issued debt) at all, but an innovative form of public service commissioning based on desired outcomes and that the tax relief is ineffective. Instead the Government should focus on encouraging more corporate issuance of liquid, tradable social bonds, in the same way that companies issue green bonds to support decarbonisation. 

  • In 2020, a record $269.5 billion of green bonds were issued by companies to fund climate investments and the UK Government has committed to issue the first green sovereign bond in 2021, totalling £15 billion.
  • The nascent social bonds sector also had a record year in 2020, with $59 billion now outstanding in the sector.

The report puts forward a series of recommendations to refocus Government efforts to unlock investment at scale for businesses and projects that benefit communities and society in the UK, including:

  1. End the Social Investment Tax Relief  in the Autumn Spending Review and replace it with a new incentive for corporations to issue liquid social debt in the public markets. 
  2. Redirect the Government’s £80m Life Chances Fund investment into a new, social investment mutual fund – investing in listed, liquid, tradable social bonds – managed by Big Society Capital. 
  3. Make clear the distinction between social investment and philanthropy, by moving social investment under the responsibility of the Small Business Minister in BEIS, instead of the Civil Society Minister in DCMS.
  4. Expand the mandate for Big Society Capital, by amending UK subsidy rules and overturning the ‘wholesaler requirement’ within Section 18 of the Dormant Bank and Building Society Accounts Act to enable it to directly invest and establish liquid social bond portfolios.
  5. Big Society Capital should consider supervisory control by the British Business Bank who have demonstrated expertise and effectiveness at funding businesses.


Gareth Davies MP, author of the report and Member of Parliament for Grantham and Stamford, said:

“The UK social investment sector has grown substantially in recent years in property investments, liquid social bonds and through lending activities. However, so-called ‘social impact bonds’ have failed to raise investment capital at scale and the Social Investment Tax Relief has been ineffective at incentivising investment into the sector. 

“A re-think and refocus is needed to truly realise the potential of the social investment market. First, by making clear the difference between philanthropy and investment, and secondly by reframing existing support and institutions aiming at mobilising private capital towards the growing corporate social debt markets. If we do this, literally tens of billions in new investment could be raised to help fund the national levelling up agenda.”


Stephen Muers, CEO, Big Society Capital, said:

“We fully support this report’s call for scaling the social investment market which is vital to the levelling up agenda and building back our communities after the pandemic. There are some interesting ideas in the report on how to further evolve and grow social investment. We will be looking at these as we continue to build on the success we have already seen in the UK social impact investment market, which has grown more than six fold over the last decade.”

Mat Ilic, Chief Development Officer, Catch22, said:

“Some of the thorniest social issues we face urgently need a pool of capital to address them. As the past few years have shown, there are many reasons why the State cannot be the banker nor the repairman, on its own. As this report has emphasised, social investment – in which the UK is truly world leading – has the potential to unlock the latent capacity resting in businesses, high net worth individuals and communities. We find this to be true in our work, as a charity by constitution but a social business, by action. 

“We welcome the publication of Onward’s report; it clearly sets out an ambition on how we might dial up social impact investing in order to get it closer to mainstream recognition, which is essential if we are to rise to the scale of the challenges that need addressing, especially after the pandemic. Institutional investors will also have a big role to play in building a wide investment market and potentially tradeable social bonds.”

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