BSC aims to grow social investment sector

Money from Big Society Capital, the government’s social investment bank, will be finding its way to local authorites through the financial intermediaries that it provides funding to.

Launched last month, Big Society Capital (BSC) is the long-awaited funding project to help kick-start social investing in the UK. It has £600m in its coffers provided from the big four banks and dormant bank accounts.

The fund will invest into the small pool of social investment intermediaries such as Big Issue Invest and Triodos Bank. These intermediaries though, may well fund projects run by local government.

Sean Davies is head of finance for Manchester City Council, which is in the process of putting together its Social Impact Bond. The route into LA projects is circuitous, he explains: “Big Society Capital is a wholesaler of funding as opposed to a direct investor, so they will consider investing into other social investment funds who may invest directly into or alongside a delivery partner who might bid for our SIB,” he explained.

Manchester’s Social Impact Bond, aimed at improving outcomes for adolescents with behavioural problems, was announced in March, shortly after Essex County Council announced it’s SIB. Peterborough was the first council to launch a SIB in 2010.

A number of other councils are trialing the concept of the bond, which works on a payment by results basis. The SIB is also being used as a vehicle by non-council groups. Triodos Bank, for example, is working with a couple of other investors on a Bristol-based SIB to fund job creation for ex-offenders.

Alastair Ballantyne, spokesman for BSC, said: “Local authorities will be a major stakeholder for Big Society Capital’s initiatives as we are investing in funds and financial intermediaries that support social enterprises, including those that need working capital to compete effectively for local authority contracts and those that invest in community assets.”

As a wider aim BSC hopes to encourage confidence in the social investment sector in order to grow it. “Part of what BSC wants to do is grow the market,” said Davies, “and part of how they will do that is by de-risking it for some of the current funds that are in there, for example by investing alongside other partners.”