A new white paper calls on institutional investors to take a more place-based approach to their asset allocation.
The paper, published by the Place Based Investing Project (PBII), which is backed by The Good Economy, the Impact Investing Institute and Pensions for Purpose, shows that opportunities exist for investors to secure financial returns while delivering impact through addressing inequalities in particular areas of the UK. It explores how institutional capital could be scaled up into local and regional opportunities in key sectors including: affordable housing; clean energy; infrastructure; small and medium-sized enterprises finance; and regeneration.
Local government pension funds invest only around 1% of their portfolio in ways that directly support local and regional economic development and positive place-based impact creation.
However, these assets already exist in local government pension scheme portfolios and have shown they can provide stable, risk-adjusted returns and low volatility.
There is an opportunity for place-based investing to complement the UK government’s “levelling up” policy, thought to require £1 trillion of spending over the next decade, says the report.
“Impact investing offers not only the capital, but also the methods and metrics which can be used to set common impact objectives and monitor and evaluate progress towards a levelled up UK,” says Sarah Forster, CEO, The Good Economy.
Local government pension scheme funds have a unique connection with places, says George Graham, director of the South Yorkshire Pensions Authority. Over the years, a number of funds have made significant contributions while achieving the returns required to meet their liabilities.
“As return becomes more difficult to achieve and, perhaps, more uncertain, looking closer to home can provide opportunities to generate the returns we need to meet our liabilities while working to improve the places where our scheme members live and work,” he said.