What are place-based impact investments?

“Place-based impact investments are investments made 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). 

Why is placed-based impact investing important?

Because 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. 

Well designed, built and maintained places help people thrive. They can help to improve well-being and drive economic growth and prosperity and reduce entrenched inequalities.    

An economy that works for all requires an intentional approach to place.  Place-based impact investing puts the investment community at the heart of delivering creative solutions which produce measurable benefits across a wide range of social outcomes. 

With the costs to the nation of levelling up expected to exceed £1 trillion over the next 10 years (Source: The UK 2070 Commission’s ‘Go Big Go Local’ report, October 2020), it is clear public investment will need to be matched by private investment. Therefore, there is a real opportunity for responsible, patient private capital to invest directly in UK towns, cities and regions in ways that enhance local resilience as well as driving more inclusive and sustainable development.  

The sectors that represent investment opportunities include but are not limited to: affordable housing, clean energy, regeneration, small and medium-enterprise (SME) finance and infrastructure.  


Mobilising more institutional investors to engage in place-based impact investing

We want to make it easier for institutional investors, in particular local government pension schemes, to consider the opportunities presented by place-based impact investing, both with regard to financial return as well as to positive social, environmental and economic impacts in local communities across the UK. 

Together with The Good Economy and Pensions for Purpose, we have published a joint white paper – “Scaling up institutional investment for place-based impact” – which sets out the case for institutional investors to adopt a “place-based lens.” 

The report shows that there are real opportunities for investors to secure financial returns while addressing place-based inequalities and supporting more inclusive and sustainable development across the UK. 

We are now implementing the recommendations of the report, working with Local Government Pension Schemes, fund managers, pension consultants, local authorities and other key stakeholders in this space to: raise awareness of place-based impact investing; build capacity to deliver place-based impact investing; improve impact frameworks on place-based impact investing; scope out origination platforms suited to facilitating place-based impact investing; and develop financing vehicles on place.  

This element of our PBII Programme is funded by the Department for Digital, Culture, Media and Sport, and the City of London Corporation.

Building Strong Places: A new impactful role for financial
institutions

We partnered with Lloyds Banking Group and place consultancies Metro Dynamics and RW Ventures on a project which focused on the role for mainstream UK financial institutions in regional regeneration.   

The report, “Building Strong Places: a new, impactful role for financial institutions” recognises the urgent need for transformational investment that improves people’s lives while futureproofing the UK economy, particularly given the importance of a socially-just climate transition and the economic crisis caused by Covid-19.  

Drawing on lessons from the US, and our work in three ‘pathfinder’ places – Birmingham, Leeds and Liverpool – the report establishes that places and financial institutions can work together to create and deliver projects which both improve people’s lives, contribute to local economic resilience and generate an appropriate risk-adjusted financial return. 

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.  

You can find out more about this project in the video below.  

Please be in touch with shadi.brazell@impactinvest.org.uk if you have ideas or contributions you would like to make.  

Case studies

The London Fund was launched in January 2020 as a collaboration between two LGPS investment pools – the London Collective Investment Vehicle (LCIV) and Local Pension Partnership Investments (LPPI) – to enable London LGPS funds to access investment opportunities in three of the PBII pillars – housing infrastructure and SME finance – across the Greater London area and surrounds.

South Yorkshire Pension Fund is the eighth largest LGPS fund in the UK as of 2020. SYPA has a longstanding commitment to investing within the South Yorkshire region with the aim of generating a commercial return and positive local impacts. SYPA has made investments across all the key PBII sectors including SME finance, affordable housing and renewable energy.

There has been a rapid rise in institutional investment in social and affordable housing over the last few years bringing equity into the sector. Recent research commissioned by the Impact Investing Institute found that the social housing sector provides attractive risk-adjusted opportunities for both equity and debt investors.

Publications

Our report, “Building Strong Places: a new, impactful role for financial institutions” was written with Metro Dynamics for Lloyds Banking Group, and explores how mainstream financial institutions can engage in place-based impact investing. The report recognises the urgent need for transformational investment that improves people’s lives while futureproofing the UK economy, particularly given the importance of a socially-just climate transition and the economic crisis caused by Covid-19.  

In partnership with Property Funds Research and supported by Homes England and Investment Property Forum, we have published a ground-breaking and comprehensive report detailing the investment case for UK social housing.

Our joint white paper “Scaling up institutional investment for place-based impact” sets out the case for institutional investors to adopt a “place-based lens.” The report shows that there are real opportunities for investors to secure financial returns while addressing place-based inequalities and support more inclusive and sustainable development across the UK.

Learning Hub modules

Private capital, including pension money, can address place-based inequalities across the UK and secure financial returns at the same time. This module explores how.

Place-based impact investments are made 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.

Local government pension funds have a legacy and interest in local investing. If 5% of LGPS funds were allocated to local investment this would unlock £16 billion for place-based impact investing, more than matching public investment in levelling up.

News & Views

In March 2021, Hyde Housing and M&G Real Estate announced a new partnership to build around 2,000 high quality, sustainable shared ownership homes. At the launch of the report “Is there an investment case for social and affordable housing in the UK?”, Catherine Raynsford, Director of Stakeholder and Investor Relations at Hyde Housing, outlined the main features of this successful partnership.

In October 2021, the Impact Investing Institute and Charlotte O’Leary, CEO of Pensions for Purpose, hosted a discussion with Amanda Latham, Policy & Strategy Lead at Barnett Waddingham. We discussed the opportunities and challenges of place-based impact investing for those advising pension funds and other asset owners, as well as hearing from Amanda about her experience delivering place-based impact investing on behalf of a Local Government Pension Scheme (LGPS) client.

In October 2021, the Impact Investing Institute and Karen Shackleton, Founder of Pensions for Purpose, hosted a discussion with Debbie Fielder, Deputy Head of the Clwyd Pension Fund. We discussed the opportunities and challenges of place-based impact investing, as well as hearing about the approach that Debbie and the team at Clwyd have taken as leaders in this field.

Events

On Wednesday 23rd February 2022, in partnership with Pensions for Purpose, the Impact Investing Institute will host an event exploring the role of asset managers in place-based impact investing.

On Tuesday, 30th November, 15:00-18:00 GMT the Impact Investing Institute, Lloyds Banking Group and Metro Dynamics hosted an event to launch the…