Big society capital (BSC) – definition and meaning

Big Society Capital or BSC is an entity that the British government formed in April 2012 with a £600 million investment. BSC aims to invest in organisations that support projects that have a positive social impact, such as social investment. An investment that is made for the benefit of society or a specific group of people is a social investment.

Social investment is about investing or lending money to achieve a social return. Not only does social investment expect a social return but also a financial one.

The Government’s Cabinet Office established BSC. In fact, it was the world’s first social investment institution of its kind.

The funds came from dormant banks accounts through an independent Reclaim Fund. Additionally, the UK’s four leading high street banks also contributed.

A dormant account is one where there has been no financial activity for a long time. In other words, nobody has been using it for a long time. In most cases, the account holders have forgotten about them.

The Government set up Big Society Capital as part of the Dormant Bank and Building Society Accounts Act 2008. It defined BSC as an entity that exists “to enable other bodies to give financial or other support to third sector organisations.”

Big Society Capital – social investment wholesaler

However, BSC does not invest directly in frontline organizations. It is a ‘social investment wholesaler’ which invests in Social Investment Finance Intermediaries (SIFIs). The SIFIs subsequently provide funding and support to social sector organizations.

BSC gets its funds from two sources:

– British banks and building societies pay money from dormant accounts into Reclaim Fund Limited. Reclaim Fund Limited holds onto enough funds to meet reclaims of any account holders. Additionally, it passes what is left to the Big Lottery Fund.

The Big Lottery Fund releases the English portion of this money to the Big Society Trust to invest in BSC. Dormant accounts should provide BSC with up to £400 million, the entity says.

– RBS, Lloyds, HSBC, and Barclays – have each pledged to invest up to £50 million in BSC.

BSC says that social investment can provide a new source of funding for charities and social enterprise. Additionally, it can fill financing gaps for innovation, growth, and develop sustainability and autonomy.

Social investment can also enable the recycling of capital for onward investment for investors. It can deepen engagement with communities. Furthermore, social investment can encourage investors to participate in a responsible form of capitalism, BSC adds.

Video – Big Society Capital’s mission

In this video, BCS Chief Executive Nick O’Donohoe explains how and why it is supporting the development of the social investment market in the UK.