Local government pension funds managing £400bn of assets support report outlining how to mobilise local investing across the country, supporting government’s growth agenda

The Local Government Pension Scheme (LGPS) has responded to UK government calls to invest in Britain, by sponsoring a report that examines how the sector can balance place-based investing to support locally-defined priorities while balancing fiduciary duty.

A new white paper published today by impact advisory firm The Good Economy, entitled ‘Scaling-Up Local Investing for Place-Based Impact: A Strategic Framework and Guidance for LGPS’, aims to usher in a new era of place-based investing, arguing that the UK needs a stronger domestic economy rooted in inclusive, long-term growth.

Wide Support

The guidance has been developed collaboratively, with the support of seven LGPS pools representing nearly all Administering Authorities in England and Wales – they have come together, recognising the need for a framework to guide the development of local, investment strategies. Its sponsors include Border to Coast, Brunel Pension Partnership, LGPS Central, Local Pensions Partnership Investments, London CIV, Northern LGPS and Wales Pension Partnership.

Pensions UK, administering authorities such as the Greater Manchester Pension Fund and the West Midlands Pension Fund and leading fund managers including Legal and General, Gresham House and Foresight Group have also contributed to the white paper.

Policy Context

It comes in response to government reforms for pension funds and local government, including the UK’s landmark Pensions Investment Review of the LGPS, aimed at improving and boosting local investment. This sits within a broader reform programme that includes devolution, local government reform, housing and planning, infrastructure investment and a new industrial strategy – all aligned with a place-based, decentralised approach to growth.

The new Local Growth Plans being prepared by Strategic Authorities are expected to provide the platform through which local government and the LGPS work together to scale-up investment that responds to local priorities in areas such as affordable housing, infrastructure, clean energy and growth businesses.

Strategic Framework

The white paper sets out a strategic framework and practical guidance for local investing by the LGPS. It sets out how LGPS capital can be channelled to support Local Growth Plans while capturing the scale and efficiency of pooling – all within a disciplined fiduciary framework.

Private market fund managers are seen as a critical enabler of local investment. The paper notes that the UK has developed one of the largest and most sophisticated private markets fund management sectors globally, as well as a well-established social and impact investment ecosystem with relevant experience. The paper provides case studies showcasing how experienced fund managers are already executing local investment strategies across the UK that are delivering robust financial returns alongside place-based outcomes.

Key Recommendations

• Tailored local investing approach – local investing won’t work with a ‘one size fits all’ approach. Administering Authorities and pools should take a context-specific approach, considering each organisation’s economic geography, governance model and delivery capacity.
• Collaboration is essential for local investing strategies – success will require active collaboration between the LGPS and a range of stakeholders, including with Strategic Authorities, central government agencies and other institutional investors, such as the Mansion House Accord signatories, to deliver investment at scale.
• Establish a common impact reporting standard – the LGPS sector should collectively establish a common impact reporting standard ensuring consistency, comparability and transparency of impact reporting – and stakeholder accountability for the local economic, social and environmental impact of local investing.

Sam Monger, Head of Place-Based Impact Investing at The Good Economy, said: “Despite its global financial strength, the UK suffers from decades of underinvestment. Public funding alone cannot meet growth ambitions, so unlocking institutional capital is essential.

“The LGPS has a distinct role to play in mobilising local investing across the country – pools and Administering Authorities must work together to set and monitor targets, embedding impact alongside risk and return. This journey is only just beginning – LGPS local investing can set new norms for responsible private market investment, delivering robust member returns and long-term value for UK communities.”

Simon Cunnington, Portfolio Manager, UK Opportunities at Border to Coast Pensions Partnership, said: “UK investment is a major focus for our partnership, with 31% (£12.1bn) of investments already in the UK and our recently launched UK Opportunities strategy targeting UK productive assets across infrastructure, real estate and commercial finance. With many of our Partner Funds leading the way on innovation in local investment, this paper provides a useful framework to support our continuing discussions with our partners and wider market participants as we move forward with the government proposals.”

Zoe Alexander, Director of Policy and Advocacy at Pensions UK, said: “The Local Government Pension Scheme is already an exemplar when it comes to investment in the UK. Building investment further – and at a local level – can help generate the additional capital needed for businesses to grow, to build vital infrastructure for communities and develop new technologies that benefit all of society. It also supports the Government’s drive to deliver more UK growth. Pensions UK was pleased to sponsor this practical guidance, which is a valuable resource for LGPS investment decision-makers aiming to get the best long-term returns for pension savers.”

Councillor Eleanor Wills, Chair – GMPF and Joint Committee – Northern LGPS, said: “The White Paper builds on previous publications and provides a framework and examples of Local Place Based Impact Investing for LGPS, Pools and Administrating Authorities to use and learn from.  I am proud that the white paper highlights GMPF and Northern LGPS as being at the forefront of Place Based Impact Investing for over ten years, and hopefully our experience can assist others in achieving the Local Investment objectives set out in the Government’s “Fit for the Future” consultation.”

Next Steps

The Good Economy is also set to release sector-specific summaries to provide further guidance on tailoring and implementing the local investing framework to different sectors.

For more information on local investing and our white paper please click here 

Sponsor Quotes

Frances Deakin, Head of Responsible Investment, LPPI, said: “The government has identified the LGPS as an engine for economic growth – delivered, in part, by funds setting local investment targets and considering local growth plans when developing their strategies. LPPI know firsthand that local investment can finance retirement benefits and deliver positive social outcomes, but achieving dual outcomes requires investment strategy to be specific about the balance between different objectives. This whitepaper is a great opportunity to collectively inspire and support the pension funds and pools that will be navigating local investments together, and we’re proud to share our experience as part of this.”

Shiv Sivanesan, Director of Investment Management & Stewardship at WMPF, said: “West Midlands Pension Fund has a long-standing commitment to local investment, working in partnership with regional stakeholders to deliver value for our members and positive impact in our communities. We welcome the growing focus on local investing across the LGPS, recognising the opportunity to achieve both strong, sustainable returns and wider environmental and social benefits. We are committed to working with partners across the sector to build a robust framework for local investment strategies that support UK growth and long-term prosperity.”

Dame Judith Petts, Chair of the Great South West Pan Regional Partnership Energy Programme Board said: “The South West will play a significant national role in delivering the UK Industrial Strategy. The role of the LGPS as a strategic investor working collaboratively across the investment ecosystem in supporting context-specific requirements, such as Floating Offshore Wind in the Celtic Sea, is powerfully articulated in the White Paper. A coherent investment approach is fundamental to delivering long-term, inclusive growth and for the UK to become a clean energy superpower with the key enablers in place – from new technologies, ports and transport infrastructure to housing and skills – that secures a new and sustainable economic future.”

Michele Giddens, CEO, Bridges Fund Management, said: “Bridges is delighted to have sponsored this paper, and welcomes its focus on investments that drive positive social and/or environmental outcomes as well as attractive financial returns. As we know from two decades of Bridges’ experience, investing in businesses, properties and projects that are meeting unmet needs can drive resilient long-term financial returns for investors while also boosting local economic growth. Local Authority Pension Funds have shown leadership in inclusive growth investment over the years. This report is a welcome guide to how this can be taken forward at scale, including through partnership between Government, pension funds and private capital.”

Andrew Dawber, Founding Partner, Civitas Investment Management, said: “With economic growth at the heart of the current government’s agenda, local investment in housing and social infrastructure is a vital driver of this ambition. Recent reforms to LGPS consolidation create a significant opportunity for Administering Authorities to collaborate and set locally-owned objectives that deliver real benefits to the individuals and families who need them most. By investing in new supported living accommodation, SEN schools, and genuinely affordable or social housing, these strategies can help meet growing demand for essential services doing more than strengthening local economies; they deliver long-term social value by improving the quality and availability of essential services, creating opportunities, reducing inequalities, and enhancing outcomes for individuals and communities. When LGPS capital is combined with institutional investment and expertise, it provides the blueprint for delivering solutions at pace and scale, and we are committed to supporting this collective effort to ensure local investment strategies drive meaningful impact across the UK.”

James Livingston, Partner and Co-Head of Private Equity at Foresight Group, said: “This white paper from The Good Economy is a timely and essential contribution to the evolving landscape of local investing. It provides helpful insight into the strategic direction needed to unlock institutional capital for place-based impact. At Foresight, we are proud to support this work and share its commitment to aligning long-term investment with the needs of local communities and economies across the UK and Ireland.”

Heather Fleming, Managing Director, Institutional Business at Gresham House, said: “Local government pension schemes can invest for the long term, supporting projects that deliver them strong financial returns and drive real economic, environmental and social benefits within their regions. From affordable housing and clean energy to natural capital and local infrastructure, when located in the right places, these investments can strengthen communities and provide long-term, stable cash flows for pension funds. But unlocking these opportunities requires more than capital alone – it calls for specialist knowledge in origination and execution, as well as robust governance expertise. By combining local insight with professional investment capabilities, specialist asset managers like Gresham House can partner with the pension pools to ensure these projects not only deliver positive local outcomes but also fulfil LGPS fiduciary responsibilities.”

Dean Heaney, Head of Institutional Investments, Mercia Asset Management, said: “We are proud to have sponsored this report, which highlights the vital role that local investment plays in strengthening the UK economy. In supporting businesses through venture, debt, and equity, we can unlock growth, create jobs, and make a positive contribution to the communities where we invest. We’re here to support asset owners as they look to deploy more capital into the UK and help turn this into real-world impact.”

Hugo Llewelyn, Newcore’s Founder and CEO, said: “Newcore has been very pleased to contribute to this Good Economy report, given our focus on local and regional investing in UK social infrastructure and our existing relationships with four of the LGPS pools. As well as seeking potentially attractive returns and positive social impact, there are other natural synergies for the pools investing in this asset class: for example, many LGPS existing and retired members are or were involved in the provision of essential services such as education, health and social care, waste and transport management; and thus appreciate the benefit of their pensions being invested in supporting and enabling these services in a sustainable way.”

Dominic Curtis, CEO, Simply Affordable Homes, said: “We believe it requires a commitment to cross-sector public and private partnership to have any chance of generating the investment and building the level of homes needed in the UK to address its housing crisis within a generation. Simply Affordable Homes is committed to attracting more responsible capital into the affordable housing sector, while seeking to source, invest in, and manage a diversified portfolio of UK affordable housing.”

Cath Webster, CEO, Thriving Investments, said: “Through our strategic funds and partnerships with LGPS investors, Thriving Investments has demonstrated what’s possible when institutional capital is aligned with community outcomes. We can evidence how place-based investments can deliver strong financial returns while driving positive outcomes for local communities. We’re proud to support this strategic framework, which provides essential guidance for the sector as it responds to the government’s local investing requirements. We look forward to working with pools and administering authorities to scale up this impact across the UK and help more pension schemes unlock the potential of local investment.”