Social investment is set to grow in 2014, boosted by a new tax relief, and entrepreneurs who want to have a social impact as well as making a profit. That’s according to Nesta’s impact investment director, Joe Ludlow, who announced the first social investments, totalling over £2m, from Nesta Impact Investments.

The £25m fund, which is backed by Big Society Capital and Omidyar Network, is investing in organisations tackling issues, such as elderly care, poor educational standards and financial exclusion, that have social impact as well as providing a potential return for investors. They include:

• Oomph! – an award winning social enterprise improving the health and quality of life of older adults in care homes through innovative group exercise classes, such as ‘chair cheerleading’;
• Ffrees Family Finance – a unique type of current account that helps families to save as they spend;
• Movellas – a new online story sharing community aimed at improving literacy skills amongst teenagers; and
• Sherston Software – a company developing innovative educational software designed to motivate children and boost their educational performance.

The UK social investment market is currently worth over £200m, and is set to grow to £1bn in the next two years. Nesta’s Joe Ludlow says that although they are seeing hundreds of investment applications, more needs to be done to show the real potential that this market offers to social enterprises, entrepreneurs and investors.

“Social investment can help tackle the major social needs in the UK, and point a way to a better financial services industry that acts in the interest of society,” suggests Ludlow. “The deals we’re announcing today epitomise this. The impact investing field is well researched and well supported by policy but we need more examples of deals done to make impact investment come alive for investors and entrepreneurs.” 

Social investment will receive a boost in April when a new tax relief for social enterprises comes into force and later this month, the government will publish a road map for social investment setting out key steps to encourage investors. The new tax relief could potentially unlock nearly half a billion pounds in finance for charities and social enterprises over the next five years, according to Big Society Capital.

Big Society Capital’s Chief Executive, Nick O’Donohoe, said: “To tackle some of the biggest challenges in the UK today, we need to ensure that financial support is available to organisations and entrepreneurs developing innovative solutions and harnessing new technology. By investing £8 million in Nesta Impact Investments, we are able to support the very best in new ideas to scale up and reach more people. This is an exciting time for social investment, as we see more opportunities for individuals to invest in these sorts of projects – using their money for both a financial and social return.”

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By Shané Schutte