Our goal is to champion impact investing that drives positive outcomes in underinvested places around the UK.
We want to see more financial institutions adopt a place-based impact investing approach and make more investments “with the intention to yield appropriate risk-adjusted financial returns as well as positive local impact, with a focus on addressing the needs of specific places to enhance local economic resilience, prosperity and sustainable development” (Source: The Good Economy).
This is because we believe that places matter. Where we live and the areas which we travel through and between, shape our lives. The places we rest, shop, exercise, work, play and meet each other in affect our identities, determine health and educational outcomes, and define access to opportunities and networks of social and community support.
The opportunities presented by place-based impact investing are mutually reinforcing: financial institutions can create new markets for commercially viable investment that generates social and environmental benefits, while places can gain access to previously untapped capital to fund transformational local growth without over-reliance on grants.
What we are doing to achieve it
There is no set roadmap for addressing regional inequality and rebalancing access to opportunity between and within places, but an economy that works for all requires an intentional approach to place. Places become ‘underperforming’, ‘left behind’ and ‘underinvested’ as a result of a complex combination of factors which culminate in market failure and vicious cycles of asset depreciation.
By working together, places and financial institutions, supported by an encouraging policy and regulatory context set by Government, can start to break those cycles.
While, of course, the worlds of finance and regeneration have intersected for a long time, place-based impact investing seeks to frame the involvement of private finance in regeneration and community wealth creation in the UK in a new way, building on the lessons of the past and carving a new niche for responsible mainstream financial institutions in addressing the challenges we face.
This started with “Scaling up institutional investment for place-based impact”, published in May 2021 and delivered by the Impact Investing Institute in partnership with The Good Economy and Pensions for Purpose, which sets out the case for institutional investors, focusing on local government pension schemes, to adopt a place-based approach. The paper has since been cited in several Government reports, including the “Levelling Up the United Kingdom” White Paper
That report identified five key barriers to place-based impact investing by institutional investors. These are:
- Lack of awareness of place-based impact investing
- Lack of appropriate financing vehicles through which to invest
- Lack of impact measurement frameworks
- Issues around origination of investable projects
- Lack of capacity and capability across these issues within many key organisations, including local authorities, financial institutions and government.
The Institute has therefore been working to address these barriers, undertaking projects on financing vehicles, investment origination, impact measurement, management and reporting, consistently seeking to increase awareness of place-based impact investing across the financial ecosystem, and working with places to increase their capacity to work with investors to address the challenges they face.
Going forward, the Institute’s Place Programme will focus on four workstreams:
- Communicating with investors to encourage more and new private capital to be invested through a place-based impact approach.
- Building mixed investors and community coalitions in place, bringing together the key stakeholders in the market in particular areas to create opportunities and facilitate mutual learning.
- Supporting the Community Development Finance Institution (CDFI) sector to reach its full potential in creating social impact through investing in underserved communities in the UK. The Institute will be scoping the development of a financing structure which would enable and encourage mainstream financial institutions to invest in CDFIs as well as working closely with CDFIs to improve and communicate their investment readiness.
- Continue to engage with policymakers, Government agencies and regulators to raise general awareness of the opportunities presented by place-based impact investment and to offer expert advice.