Pension funds remain the most active investors in the UK’s social impact sector, with a strong focus on social and affordable housing, according to a report by Better Society Capital.
The UK’s social impact investment sector grew to £11.2bn (€12.8bn) in 2024, marking a rise of just over 10% compared to 2023, according to the latest annual market sizing report from Better Society Capital (BSC).
According to BSC, this increase continues a long-term trend, with the market having grown from around £830m in 2011 to 2024’s figure, roughly a 13-fold increase.
The growth of the social impact investment market comes at a time of deepening and complex social challenges in the UK, such as rising inequalities, housing pressures, health inequality, and child poverty, with BSC stressing that such investments are more important than ever.
Sector growth has been driven by rising demand from a diverse range of investors, particularly local government pension funds, as well as charitable foundations and endowments, who are increasingly prioritising impact, BSC CEO Stephen Muers told Impact Investor.
Muers said that the core driver behind this is the growing number of investors who actively care about generating social value alongside financial returns, a trend reflected in the expanding mix of institutional and retail investors entering the social-impact space. “The real underlying reasons for growth is that there are more and more investors who care about impact.”
The 2024 market-sizing estimate is built from a pool of over 100 funds, intermediaries and social banks that meet BSC’s definition of social impact investment, including both real assets and investments into social purpose organisations.
Market systems
BSC splits the social impact market into four market systems which reflect where social impact investing in the UK is being channelled: social and affordable housing, social lending, impact venture, and social outcomes contracts.
In 2024, social and affordable housing was the largest and fastest-growing market segment, representing around 54% of the market, attracting new investments of £1.09bn last year, up 27% from £861m in 2023.
Social lending, such as loans to charities and social enterprises, had the second largest share with 39% of the overall market. Impact ventures represented 7%, followed by social outcomes contracts (SOCs) with less than 1%.
According to the report, BSC’s aim was to double the market size to £10–15bn by 2025, and at £11.2bn, the market has already passed the lower bound. However, rising interest rates may limit short-term growth, Muers said.
Looking ahead, BSC said it will continue to invest in high-impact areas, while deepening its work with the UK government, having previously helped shape new policy, such as the Better Futures Fund, which is hoped to revive the stagnant social outcomes contracts market, and the Office for the Impact Economy, to unlock capital, scale social-outcomes contracts while widening access to investment across communities.
