Profile: CEO Big Society Capital committed to ‘pushing frontiers of impact investing’

Impact investing needs to be more accessible to wider groups of investors, says Stephen Muers, the new chief executive officer of Big Society Capital, a leading UK impact investor.

Stephen Muers, the newly appointed chief executive officer of British social impact group Big Society Capital (BSC) may come across as a mild-mannered former civil servant, but there is a lot going on at BSC under his direction.

A deal announced earlier this month gives us some clues as to what direction he will take BSC, which he has guided through the Covid crisis in the past year as interim CEO. Muers was officially appointed CEO on May 1, and one of his tasks will be to launch a new strategy later this year.

On June 10, the UK Government announced it would match a £15m BSC investment to fund 200 homes for rough sleepers. This is a three-year pilot scheme, with “the financial returns reinvested into providing homes for rough sleepers or those at risk of rough sleeping for the next 30 years,” Muers told Impact Investor in an interview.

Insider brings BSC closer to government

There had been some question marks regarding the appointment of Muers, who was seen by some as a political ‘insider’ and civil servant with no experience in private finance.

But Muers says government can be just as important a partner as the private sector. He says he believes in a “positive dialogue with the government.”

And where BSC’s policy choices match those of the government, the impact can be enormous. “So far we have helped thousands of individuals. I would like to make this to tens of thousands.”

This means continuing to work in established priority areas such as homelessness, but it can also mean entering new areas. Muers is committed to being at the “cutting edge of impact investment,” and to “keep pushing the frontiers of impact investing.”

“It is really, really important to build the wider market for impact investment”

Muers, only the third CEO to lead BSC, is aiming high. “My mission is to take impact investing in the UK to a new level,” he says.

Big Society Capital was set up in 2012 with £425m from dormant bank accounts in England and £200m from the largest UK banks (Barclays, HSBC, Lloyds Banking Group and NatWest Group). BSC has seeded and scaled more than £2.5 billion of social impact investment vehicles, with £750 million of its money alongside £1.8 billion from over 100 institutional investors.

“My mission is broader than just BSC’s direct investments,” says Muers. “It is really, really important to build the wider market for impact investment. We only succeed if we build a bigger market than us.”

The appetite for impact investing has grown strongly in the UK in the past decade. The social impact investment market in the UK was estimated to be worth £5.1 billion in 2019, compared to £800 million in 2011, according to BSC.

Schroders partnership

Under the leadership of Muers, BSC recently partnered with UK asset manager Schroders to launch the Schroder BSC Social Impact Trust, which is aiming to raise £300-£500mn over the next five years.

Its UK-wide portfolio will focus on housing funds for vulnerable groups, debt for social enterprises and provide capital for expert charities and social enterprises active in homelessness support, health, education, family therapy and children’s services.

In recent years, BSC has seen a much more diverse range of asset owners including insurance companies, pension funds, family offices, foundations and large professional investors dedicate funds to social impact investments. Overall, more than 100 investors have now invested in funds alongside BSC.

“Investments that have built up experienced teams that have demonstrable track records in financial return and impact are better able to attract investors that require risk-adjusted financial returns and impact,” BSC said in its 2020 annual report [PDF].

“We’ve learned that investors often find social impact investment unfamiliar, too complex and lacking the necessary scale to make an impact.” Muers likens the new fund to “impact investing for everybody, not just City ‘big wigs’”, before adding you can buy as little as just one share.

“We wanted to create a vehicle that would attract a much wider audience,” says Muers. In other words: “To give a wider group of investors direct access to the impact market.”

Resilience and Recovery Loan Fund

It should come as no surprise that BSC is playing a prominent role in the UK government’s Resilience and Recovery Fund (RRLF), an emergency loan fund that was set up to assist social enterprises and charities whose business models were disrupted by Covid.

Their initiatives are wide-ranging, both in terms of purpose and geography. Take Fishermen’s teeth, a social-purpose dental service based in Cornwall, which took a loan so that they could deliver urgent dental care for hard-to-reach people and their families.

BSC’s RRLF loans are also supporting children’s nurseries, including a social enterprise nursery looking after 2,750 children at financial risk in southeast England.

The desire to get others to co-invest will drive Muers’ target returns. For social projects with the biggest impact this might be as low as 2/3%, while others could be up to 9%.

Muers assures us “we’re not afraid to take risk” but when it goes wrong, he’s philosophical: “of course some of our investments have had a negative return – it’s only to be expected.”