“The UK is a country of entrenched place-based inequalities which have persisted for generations and are more extreme in the UK than most OECD countries.” So begins Scaling Up Institutional Investment For Place-Based Impact: a white paper published in May 2021 by The Good Economy, Impact Investing Institute and Pensions for Purpose.
For place-based impact investing (PBII) to have the impact it needs, say the report’s authors, public investment needs to be matched by private investment. The report details how private investment capital can be used to “deliver positive environmental and social impact in places and communities across the country”. If you’re an investor interested in impact investing, read on…
Potential returns for everyone
While the initial research and report focused predominantly on the role that the Local Government Pension Scheme (LGPS) can play in addressing place-based inequalities, the team behind the project believes that PBII has the potential to appeal to investors of all types.
The report details how a place-based approach ties in with the Government’s “levelling up” agenda: a boost on investment in green technology, infrastructure and healthcare to create more jobs post-pandemic. Costs to the UK of this levelling up are expected to exceed £1 trillion over the course of the next decade, which is why private investment is likely to be required.
Place-based investment of LGPS funds would not only boost local economies and environments, but can also offer lower levels of volatility and high, stable long-term returns, says the report. The same would apply for institutional investors but, as the authors point out, other types of investors rarely favour a place-based approach, meaning that one of the major challenges in increasing private investment is increasing awareness.
A brighter future?
With only 1% of LGPS funds currently invested in PBII, the report estimated that a 5% allocation could unlock a potential £16bn for local investing. However, in order to do so, pension funds must ensure that they can identify genuine opportunities, avoiding “impact-washing” and having the ability to monitor the impact of their investment over time.
Going forward, the research team have now entered phase two of the project, harnessing the interest generated by those involved in phase one. Click here for continued updates.
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