Joe Shamash talks to PMP about the rapid rise of social impact investing and the opportunities emerging at the cutting-edge of the sector
Better Society Capital has established itself as the UK’s leading social impact investor since it was set up in 2011. It was capitalised with £400 million from the UK Government’s Dormant Account Scheme and £200 million from Barclays, Lloyds Banking Group, RBS and HSBC. It now manages almost £1 billion, playing a key role in building the country’s £10 billion social impact market.
BSC’s investments all have dual objectives, targeting social and environmental goals alongside financial returns. Its mandate requires it to focus almost entirely on the UK and the centrality of impact means it is entirely invested in private markets, with one-third invested to support a just transition to net zero.
Joe Shamash is an investment director at BSC. “We invest through funds in enterprises and projects addressing entrenched challenges faced by people experiencing disadvantage within the current social, economic system in a way that’s capable of crowding-in private investment at scale over time,” he says.
BSC has three key criteria when considering an asset class. Is there a route to put capital to work for the benefit of UK communities in a financially sustainable way? Is there a need for an organisation that is willing to take on relatively complex and early-stage projects? And is there the possibility to crowd-in other investors over time? “These factors dictate our focus,” he says.
For example, BSC seeks to tackle the housing crisis by investing in affordable, social and transitional housing, as well as lending to social enterprises and charities.
The community energy model has been very successful at small scale and we’re looking at ways to help this sector grow
Joe Shamash, Big Society Capital
“We also invest in venture funds looking for tech-enabled solutions to improve health outcomes, financial inclusion and education as well as climate-related outcomes.” Another high impact asset class BSC has supported is social outcomes contracts – a public private partnership (PPP) model that allows investors to put capital to work to deliver positive outcomes for communities – where government payments are linked to success.
The just transition to net zero is a key theme for BSC. “About a third of our investments to date have brought together social and environmental goals,” he says.
Much of this has been in energy generation, where it invests in a wide range of small-scale community owned renewable projects and works in partnership with local communities to facilitate engagement and ownership.
“The community energy model has been very successful at small scale and we’re looking at ways to help this sector grow,” he says. “It offers a powerful way to accelerate the UK’s transition to net zero, enabling local communities to take the lead using an asset-backed finance product that offers a competitive risk-adjusted return. Public buy-in to net zero is crucial, and partnerships between lenders and communities on new infrastructure can help speed up projects, progress them through planning permission, de-risk them, ensure they work long term and mobilise communities to drive climate action.”
Energy efficiency is another area where BSC has invested and seen strong financial performance alongside high impact. One of its most successful investments has been AgilityEco, a company that delivers energy efficiency services across the UK, with a focus on households at risk of fuel poverty. The company took on growth funding from the BSC backed Bridges Inclusive Growth Fund in 2019. Bridges secured a 3x exit in 2024, at a time when AgilityEco had grown to reach more than 50,000 households annually, saving them £200m in lifetime energy bills.
Creating markets
While these two developed social impact themes offer clear investment paths, BSC is still exploring how earlier stage areas can be developed. Shamash describes a third theme of natural capital and climate resilience as “a very exciting movement” in private markets.
Investing in natural capital projects can provide new sources of revenue, such as a rewilding project leading to activities including eco-tourism and education as well as potentially delivering biodiversity net gain credits. It finances “social enterprises and charities that have great track records in delivering nature and conservation projects, ones we think will be leaders in the space over the coming years as they develop new models,” he says.
Climate resilience is at a similar state of development. “It is at a very early stage but there is growing interest in financing resilience to extreme weather in the UK – which is a major economic cost, and impacts disadvantaged communities the most,” he says. “So, for example, we are exploring new models that can reduce the impact of floods and provide benefits to local businesses, insurers and communities.”
A fourth just transition investment area for BSC is place-based models for net zero, which involves regional funds partnering with local governments, SMEs and infrastructure to deliver coordinated net-zero investment plans.
BSC provides both seed capital at the earliest stages and scaling capital at later stages. “We look at opportunities that need first movers for new and innovative models, when it’s difficult to attract any investment, and we also work on more proven models where we can help bring in a wide range of private capital at scale,” he says. “Fundamentally, it comes down to there being clear impact, a viable investment model, a role for BSC and the ability to bring in other investors.”
Political winds
Due to BSC operating in social sectors, its investment strategy is necessarily impacted by government policy. “A lot of our underlying investments have revenue models that are linked to government funding streams,” says Shamash. “That means we have a relatively high exposure to policy risk, which we need to manage. It is a key area for us to assess before making an investment.”
To partially mitigate this, it operates in areas that have cross-party support and long track records of operation. It also draws on an extensive team with a deep understanding of UK government policy, aiming to maintain a resilient and uncorrelated portfolio with stable returns across the economic cycle. Built on these solid foundations, BSC is able to operate at the boundaries of social investing.