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ESG

U.K. impact investing board outlines steps for investors to align with sustainable development goals

Union flags fly above England-themed souvenirs, including scarves and novelty hats, at a street vendor’s stall near the Houses of Parliament in London, U.K., on Monday, Jan. 12, 2015. U.K. consumer inflation has held below the Bank of England’s goal for a year, and Governor Mark Carney said today the bank had "the means" and "the will" to return it to the target. Photographer: Jason Alden/Bloomberg

Institutional investors' capital should be aligned to the United Nations' sustainable development goals to promote an inclusive and sustainable economy, says a new report.

The U.K. National Advisory Board on Impact Investing launched a report outlining five steps to reach this goal: adopt an inclusive and sustainable U.K. investment agenda; empower savers to invest in line with their values; put purpose at the heart of public procurement; accelerate the rise of purposeful business; and strengthen the U.K.'s role in international development finance.

The report said pension funds, foundations and other institutional investors should "seize on investment opportunities that help achieve the SDGs in the U.K." Aligning institutional investment capital to the goals "can help address a range of pressing challenges, such as increasing investment into parts of the U.K. that are being left behind."

Within the first step to adopt an inclusive and sustainable U.K. investment agenda is a call on the U.K. government to establish an Inclusive Economy Catalyst Fund of at least 2 billion ($2.7 billion) to "jump-start investment into communities that have seen decades of underinvestment and no real income growth. This would leverage in significant private investment, that could reach tens of billions of pounds over five to 10 years and meaningfully affect growth and opportunity across the U.K."

Under the second step to empower savers, the report calls for increased engagement with defined contribution plan participants on how these investors want their values reflected in their investments. This should move toward the development of the "pensions with purpose" strategy, which would include an allocation to impact investments. The government should in turn ensure a supportive regulatory environment for these strategies, the report said.

Within public procurement, the report suggested a 20% minimum weighting be allocated to social value in all procurement decisions by central and local governments.

To accelerate the rise of purposeful business, the U.K. government should appoint a purposeful business task force, made up of senior business leaders to develop inclusive business best practices.

The final step, to strengthen the U.K.'s role in international development finance, recommends that asset owners put more capital to work using the sustainable development goal framework, as well as utilize innovations from the impact investment sector.

The report said about 3 trillion in capital could incorporate impact investments to some degree over the next decade, of which 300 billion could be channeled into investments that directly address critical social and environmental challenges.

The U.K. National Advisory Board is the U.K.'s voice in a global steering group of 15 member states plus the European Union.

The report will be available on the National Advisory Board's website.