Social investment is often spoken about as if it is the same thing as impact investing. Organisations as influential as the OECD describe the terms as ‘interchangeable’[1], and the umbrella term, ‘social impact investing’ reinforces this impression.

No, this isn’t a blog about terminology – the difference between these things is critical to the direction of Big Society Capital (BSC) over the coming years.

A brief explanation of the difference is as follows. This is more or less in line with Phil Caroe at Allia’s recent article:

  • Social investment is home-grown in the UK, and is about providing access to finance for social sector organisations (SSOs). The UK government has been very active in its development, and lots of public money has been spent (or invested), not least the money directed by the Dormant Accounts Act into BSC. [2]
  • Impact investing originates in the US and is about persuading or helping the owners of private capital to take impact into consideration when deciding how to invest.

This is not a distinction that always works in practice. Social investment also involves working with private investors to allocate their capital towards social impact. Similarly, impact investors might invest in SSOs. There can be an overlap between the two. But it is undeniable that two very different histories – and, potentially, trajectories – are attached to these two terms.

So what does this mean for BSC?

For starters, BSC as it currently stands is firmly in the ‘social investment’ camp. BSC uses the terminology of social investment, rather than impact investing: “Social investment is appropriate repayable finance that charities, social enterprises and communities can use to grow, become more sustainable and increase their impact on society.”[3] And the hallmark of social investment – a commitment to providing finance only to SSOs, is enshrined in its governance agreement.

This translates into quite a challenge for BSC, which has engaged extensively with the social sector over the past 3 ½ years in an attempt to increase the number of enterprises who both meet their strict requirements and are viable investment opportunities.

But things can change. BSC operates within a tight network of organisations associated with social investment and impact investing, both domestically and internationally, and the tools are out there to potentially shift the mission and focus of BSC quite substantially. The II/SI distinction helps us to identify possible trajectories. Since we know Cliff is already a fan, let’s take the example of ‘profit with purpose businesses’.

From the perspective of impact investing, the case for-profit-with-purpose businesses is fairly straightforward: it is a way for impact investors to identify businesses that are mindful of their social impact but don’t have an asset lock, thus opening up investment opportunities that are made difficult by the legal structures of SSOs.

From the perspective of social investment, the idea of profit-with-purpose business serves mainly to expand the pool of SSOs. From the perspective of existing SSOs, it is hard to be positive about this shift: profit-with-purpose businesses increase competition for social investment resources, and – the argument might go – they reduce the incentive of organisations like BSC to spend the time figuring out a way to match the needs of capital with the needs of the existing social sector.

It would be easy to make this SI/II divide fit some well-established but outdated ways of viewing the sector, for example by seeing social investment as on the side of community values and true prioritisation of social mission, and impact investing as about the pursuit of profit and hard-nosed financial discipline. But this would be missing the point. Both SI and II start with the idea that there is huge potential for positive change if the methods of business and investment can be taken on by the social sector.

Where the SI / II distinction is helpful is in demonstrating that it is possible to be on board with this change, but from a position that challenges the ideas that dominate in impact investing. After all, the original argument for using the dormant accounts money was to strengthen the third sector’s ability to address social problems.

The profit-with-purpose example is typical of the decisions Cliff will face as he develops BSC’s strategy: while a move in this direction might genuinely help BSC in its stated mission of building the social investment market, it is worth asking whether this would be a version of the market that makes more sense from an impact investing perspective.

Another way to look at it is this: does the impact investing perspective need the help of BSC, considering the enormous momentum put behind it by the G8 Taskforce and international organisations such as The Rockefeller Foundation and the GIIN?

I would think not. But does social investment need BSC? Absolutely.

The reality is that the impact investing perspective is one that Cliff may well decide to take. At the very least we should call on him to be honest and upfront about such changes – there is only so far he can move away from the perspective of existing SSOs before it’s not really about social investment any more.


Jess Daggers is a freelance consultant and researcher specialising in impact measurement for social enterprises. Currently working at the Said Business School to scope the current state of globals research into social investment. Also pursuing a PhD looking at the UK social investment market.



[1] p43 – Wilson, “Social Impact Investment: Building the Evidence Base”, OECD, 2015.

[2] Strictly speaking this is quasi-public money, as it does not pass through government accounts, but its use is bound by the terms of an act of parliament.

[3] Robinson & Rowell, “Better Finance, Better Society”, Big Society Capital, 2015.,%20Better%20Society%20-%20policy%20priorities%20for%20social%20investment%20.pdf