The Emergence and Growth of Social Finance in the UK

Abstract: This paper presents an exploratory case study of the factors that explain the emergence and growth of social finance in the UK. Social finance refers to an array of activities that address societal issues using finance tools and logic. The practice of social finance manifests itself in the investment in social organisations and enterprises. Investments in social finance, ultimately aim to generate both a social and a financial return. While, the results imply that the practice of social finance is far more complex that the theory suggests, evidence maintains that social finance is nonetheless a growing movement. As such, four factors have emerged as explaining the emergence and growth of social finance. The first factor is that the practice of social finance is predominantly justified by the desire to tackle major social and environmental issues. The scope of these issues is limited to some general macro themes, such as education, social care, health and environmental sustainability. The second factor is the aim of making both a financial and social return on investment. The findings suggest that investors have needed to prioritise either social or financial returns in that respect. Thirdly, the emergence of social finance can be explained by the goal of transforming the social sector by reducing dependency on grant-funding and increasing effectiveness and financial sustainability. Finally, actors and institutions involved in social finance have been sustained by the ultimate effort to build a social finance market. In this respect, social finance initiatives have been as much about solving societal and environmental problems effectively as it has been about building a new market out of it.