How the big four banks are proving private capital can drive social change
Better Society Capital has unlocked £4bn in social investment over 12 years, proving how public-private collaboration can tackle the UK’s most complex challenges – from housing to healthcare. Here’s why it’s time for more investors to step up, says James Chew
In 2011, the UK’s four largest banks – Barclays, HSBC, Lloyds and NatWest – invested £200m to support the creation of Better Society Capital alongside £400m from the Government using money reclaimed from dormant bank accounts. As the representative of these banks on BSC’s Board, I’ve had the privilege of witnessing its evolution firsthand.
The ambition was bold yet simple: to transform the UK’s social investment landscape by creating an institution dedicated to growing investment into tackling complex social issues in the UK. At the time, it was uncharted territory.
Twelve years later, the results speak volumes. BSC has committed over £1bn to social investment schemes, unlocking a total of £4bn for mission-led organisations tackling everything from homelessness to healthcare and affordable housing across the UK.
Yet BSC’s true innovation extends beyond the figures – it lies in its willingness to use or create new investment models where complex social challenges demand financing solutions that traditional models can’t always provide. BSC bridges this gap by creating mechanisms for players across the public and private sectors to work together.
Pioneering a new model of collaboration
The journey hasn’t been without challenges. BSC’s formative years required patience, experimentation and a mindset focussed on long-term, measurable outcomes rather than short-term gains. It meant navigating new legal frameworks, aligning stakeholders with different risk appetites and, in many cases, building products and markets where none had existed before.
Building the model has also required a profound focus on social impact – starting with the challenge itself and working backward to design interventions that deliver meaningful change for those affected.
One of the first areas which BSC pursued was Social Outcomes Contracts (SOCs), a model based on paying for results. Providers making interventions are incentivised to solve, not just service, social problems while investors take on the risk of success and when targets are met, they’re rewarded.
For example, investors provided funding to Stronger Families Norfolk so that it could support children on the edge of care due to abuse or neglect. As of November 2024, 92 per cent of participants have remained with their families preventing 216,284 days of care and avoiding over £15m in costs – a powerful demonstration of the meaningful outcomes which can be delivered for people, investors, and public finances alike.
Beyond SOCs, BSC has invested through a range of successful models – from affordable housing and social lending to impact venture – each tailored to address different challenges across the social economy.
A standout success has been in social housing, where BSC has helped grow a unique investment model. By investing in pools of capital managed by fund managers that understand the complex nature of homelessness, thousands of homes have been made available while also generating stable risk-adjusted returns for investors. These funds have created a powerful template that other managers and investors are now adopting, and this solution was made possible through social investment.
This has contributed to the remarkable growth of the social investment market from £800m in 2011 to an estimated £10bn today.
Setting the stage for scale
BSC’s success represents a powerful proof of concept. Alongside government leadership, skilled management and sector-wide support, the big four banks have helped unlock a better approach to social issues and the opportunities are now much clearer.
A new government presents an opportunity to embed the funding from social investors into our national policy for tackling social problems. The recently established Social Impact Investment Advisory Group is a positive step forward, bringing together private sector expertise, government policy-makers, and social sector leaders. The challenge now is to move from pilots to policy: creating the right incentives and frameworks that allow social investment to move into the mainstream.
This includes supporting blended finance tools to enable institutional capital – pension funds, insurance providers, sovereign wealth funds – to deliver social value alongside financial returns. As welfare budgets face growing pressure, innovative financing models become even more critical to sustaining vital services.
It’s time to step up
The UK now boasts a social investment infrastructure which is more developed than most major countries, with a growing number of intermediaries managing projects and compelling evidence of both social and financial returns.
What we need now is broader participation. The market offers diverse investment opportunities suited to a wide variety of investors, with a range of quantum, duration, risk and returns. The four banks are at the heart of this project, with equity invested to build a social market in the UK. Other investors – wealthy individuals, philanthropists, family offices and corporates – should look to find the type of social investment most suited to them. The most important thing, however, is that they participate.
BSC’s journey shows what is possible when capital is deployed with purpose. We face a future of deep social needs to address issues such as inequality, climate change and underfunded public services. These are not challenges that government can solve alone. Through smart public-private collaboration, we can build a financial system that helps address them better.
James Chew is group head, Regulatory Strategy at HSBC Holdings plc