New data shows increased appetite for impact private equity investment

New data on the shift in attitudes of major UK local government pension (LGPS) and defined contribution (DC) schemes towards impact investing in private equity was released recently, in a study conducted by Pensions for Purpose and sponsored by Columbia Threadneedle Investments.

The changing attitudes of both major UK local government pension schemes and defined contribution (DC) funds to private equity investment has been captured by new research by Pensions for Purpose released in July.

It finds that in one third of cases (33%), the primary motive for accessing impact private equity investment is to secure a more sustainable future that benefits their portfolios.
After this comes the pursuit of a solid risk and return profile (25%), boosting member engagement (17%), moral imperatives (17%) and to align with the government’s “levelling-up” initiative (8%).

The notion that funds must give up returns through impact investing is rejected by this study, with most pension funds taking the view that impact offers material financial benefits.

The research identified a trend towards locally oriented UK impact investment but warns against too narrow a geographical focus, and urges pension funds not to restrict themselves to UK impacts alone.

The study calls on asset managers to devise innovative strategies that enable DC schemes to include impact private equity within their fee limitations. This could significantly broaden the number of pension schemes that can contribute to solving global problems, while simultaneously delivering financial growth.

Karen Shackleton, chair and founder of Pensions for Purpose, said: “It’s important to recognise that pension schemes are primarily impact investing for financial reasons, but they are also increasingly focusing on UK impact.

“However, we advocate a global perspective on impact investment to meet crucial targets such as the net zero transition.

“Asset managers can be pivotal here, by creating innovative strategies that make impact private equity accessible for DC schemes within their fee boundaries.”