The Place-Based Impact Investing Project (PBII) led by The Good Economy, the Impact Investing Institute and Pensions for Purpose have published an eagerly awaited white paper setting out a case for institutional investors to adopt a “place-based lens.”
The project – supported by DCMS, City of London Corporation and Big Society Capital – has explored how to unlock billions of pounds of investment from institutional investors, particularly pension funds, to play a significant part in the ‘levelling up’ agenda and economic recovery post-pandemic.
The research found that across £326 billion of Local Government Pensions Schemes (LGPS) in the UK, there is the potential to mobilise £16bn immediately for place-based investments like affordable housing, SME finance, regeneration, clean energy and infrastructure.
That is more than enough to match all of the government’s ‘levelling up’ funds, and is just the start should this place-based impact investing approach be embraced by pension funds more widely.
Place-based inequalities, the report points out, are more extreme in the UK than in most comparable economies and have existed for generations. Meanwhile, the coronavirus pandemic coupled with Brexit have moved this seemingly intractable reality to the centre stage of the public debate.
PBII Project white paper's main findings:
- Assets identified as place-based investments already exist in portfolios of local government pension schemes and can provide stable, risk-adjusted returns and low volatility.
- Currently, place-based impact investment is limited, with local government pensions schemes investing around 1% of their portfolio in ways that could directly support local and regional economic development and positive place-based impact creation.
- However, there is a legacy of local investing by local government pension funds, reflected in statutory guidance allowing for 5% of funds to be allocated to PBII. If this level was achieved, £16 billion of investment would be focussed on delivering both financial returns and responding to the needs and opportunities of specific places.
Meanwhile, the UK government’s “Levelling Up” agenda is expected to
exceed £1 trillion over the next 10 years, highlighting a clear need for
private capital to be mobilised alongside public investment.
Karen Shackleton, Director, Pensions for Purpose, said: “We have seen a significant increase in interest in impact investment from the Local Government Pension Scheme over the past three years with a growing understanding that it is possible to deliver market rate, risk-adjusted returns alongside social impact.”
Sarah Gordon, Chief Executive, Impact Investing Institute, said: "Connecting private capital to deliver positive impact, in the places that most need it, is not only crucial to building back better after the coronavirus pandemic, it also has the potential to unlock significant investment."
- Investors and other place-based stakeholders interested in participating in the next phase of project or simply to receive project updates can sign up here.