The value of the social impact investment market reached £5bn last year, according to analysis by Big Society Capital (BSC).
This is six-fold increase in value over eight years, BSC said, and a 20% increase during the last twelve months alone.
The growth has been driven by the expanding market in alternatives to traditional bank lending, which has increased in size twenty times over since 2011.
BSC's analysis says that the market was worth £5.1bn in 2019, up from £830m at the beginning of the decade.
During this period, the value of alternatives to traditional lending has risen from £169m to £3.4bn, with a “diversity” of different types of investors entering the market, BSC said in a statement.
However, secured bank lending remains the source of finance most often taken on by social enterprises or charities.
There were than 5,000 social impact investment transactions last year, an increase of 18% compared with 2018.
Investors included venture capital funds, social banks, social property funds, charity bonds, and specialist lenders.
Impact investment in housing
Social property funds now make up over 40% of outstanding social investments, and represent the largest segment of the market.
These funds generate social impact by using their capital to support projects such as building more specialist supported housing.
‘An engine of economic recovery’
Stephen Muers, the interim chief executive of BSC, said: “It is very pleasing to see the substantial growth in the market to the end of 2019 and the growing popularity of the different investment options available, encouraging a broader spectrum of investors into this market to create greater positive change for people across the UK.
“The impact of Covid-19 has been both social and economic and I believe will be a key driver in shifting investors’ focus from a purely financial return to one that delivers a social impact too.
“I expect social impact investment to play an increasingly important role as an engine of the economic recovery.”
More smaller deals
BSC also stressed that its funding is also meeting demand for smaller investments.
It said that around 20% of investment in 2019 was committed through the Growth Fund, which was established to give organisations repayable finance of up to £150,000.
The fund uses money from BSC and the National Lottery Community Fund, and is managed by Access – The Foundation for Social Investment.
Seb Elsworth, the chief executive of Access, said: “The Growth Fund continues to be a cornerstone of social investment in England, with around one in six of all deals in 2019 coming from the programme.
“Average size investments of just over £60,000 are meeting clear demand from the sector. These numbers show the vital role blended capital plays and the need for long-term subsidy to support it.”