Social impact investment market grew to a record £9.4 billion in 2022

Published on November 8, 2023 by Blackstone

Concerns about social issues and an increase in opportunities have led to more people choosing social impact investments. They could present a way to tackle issues that you care about while still delivering returns. Read on to find out more.

Social impact investing aims to use capital to support businesses that are providing solutions to some of the world’s biggest societal challenges with measurable social benefits. As a result, it seeks to build stronger communities and improve lives.

This approach to investing might cover projects that deliver affordable homes, community food banks, mental health support and much more.

It doesn’t mean forgetting about the financial return of investments. Investors still aim to grow their wealth through social impact investing.

You may view such investments as having a double bottom line – that is, you want to create a return in terms of both money and social benefits. 

Social impact investments increased 18% in 2022

Data from Big Society Capital suggests there is demand for social impact investment opportunities. In 2022, the amount invested to tackle social issues was £9.4 billion, up from £7.9 billion in 2021.

The organisation says three key drivers led to the boost:

• Social investments might provide a way to diversify portfolios
• Strong long-term demand among the sectors related to social impact investing
• Some investment areas, like social housing, are backed by government funding.

Big Society Capital is now calling on the government to incentivise further investments in the sector. Investments in areas that are supported by the government could be more resilient to macroeconomic factors, like economic performance. As a result, they may be an attractive option for some investors.

The social and affordable homes sector saw the biggest inflow of investment. It accounted for around £5.1 billion of the total amount invested in 2022.

The focus on housing isn’t surprising given a House of Commons report found that the number of new houses built each year is significantly below government targets. With demand for property likely to remain high over the medium and long term, potential returns could be tempting for investors.

The UK was also found to be a leader when it comes to public service innovation. Investors diverted £28 million to tackle complex issues like labour market inactivity, criminal justice, and NHS backlogs.

A key benefit of social impact investing when tackling challenges is that it could reach the communities that need it the most.

According to the research, 82% of organisations receiving social lending in 2022 were based outside of London. Almost 62% of the funding went to the most deprived areas in the UK. So, investments have the opportunity to make a significant difference.

3 useful steps to take if you’re interested in social impact investing

1. Define which social issues are important to you

Social impact investing covers a broad range of areas. Having a clear idea about which issues you’d like to focus on could narrow down the market and mean your investments are more likely to have the desired impact.

As well as the sectors you’re interested in, you might want to filter social impact investments in other ways too. For example, you may want to search for opportunities that are within your local area.

2. Assess your risk profile

As with all investments, social impact investing carries risk. However, the level of risk will vary between opportunities, so understanding how much risk is appropriate for you is important.

Many different factors will influence your risk profile, such as your investment time frame and your financial circumstances, including your capacity for loss.

If you’d like help understanding your risk profile, please contact us.

3. Consider your wider investment portfolio

You may want to review potential social impact investments alongside your wider portfolio. This could help ensure your portfolio is balanced and diversified.

For instance, if you choose social impact investments that have a higher level of risk, you may decide to take a more conservative approach with other areas of your portfolio. Incorporating social impact investments into your investment strategy may be useful when you’re assessing if an opportunity is right for you.

Do you want to explore social impact investing? Contact us

If you’d like to understand how you could invest with social challenges in mind, please contact us. We can help you understand if it’s appropriate for you and how it could fit into your wider investment portfolio.

Please contact us to arrange a meeting.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.