Local authority pension funds should invest £16 billion ($22.5 billion) in impact opportunities to help the U.K. to "level up" and recover from the pandemic.
Research by the Place-Based Impact Investing Project — led by social advisory firm The Good Economy, the Impact Investing Institute and Pensions for Purpose — said just 5% of the £326 billion in local government pension schemes could be mobilized to make a difference.
So-called place-based investments, such as affordable housing, small and medium-size enterprise finance, regeneration, clean energy and infrastructure, could benefit from the additional funds. Only about 1% of LGPS assets is currently invested in projects that support local and regional economic development.
Place-based inequalities are more extreme in the U.K. than in most comparable economies, a report of the research said. The pandemic and Brexit have also moved these inequalities into the spotlight, the report said.
"We have seen a significant increase in interest in impact investment from the (LGPS) over the past three years with a growing understanding that it is possible to deliver market-rate, risk-adjusted returns alongside social impact," Karen Shackleton, director at Pensions for Purpose, said in a news release accompanying the report.
The Place-Based Impact Investing project is supported by the Department for Digital, Culture, Media and Sport, the City of London Corp. and Big Society Capital.