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.
Opportunities for mainstream financial institutions to invest in places can be found across sectors and asset classes, for example within housing, SME finance, clean energy, infrastructure, physical regeneration and social infrastructure.
This report demonstrates how place-based impact investing relationships can become “shared spaces” which bring together places and their representatives with private sector partners, equipping both with the language, tools and access to create positive impact in places.
Drawing on lessons from the US, “Building Strong Places” establishes that the UK’s high street banks could be natural partners for this agenda, with existing lending across the range of relevant sectors and in communities across the UK. 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.
The report makes recommendations to Government, financial institutions and places wishing to activate the potential of place-based impact investing to drive social impact.
The report’s key recommendations include:
- There is a clear role for Government in facilitating policy change, regulatory encouragement, and funding to de-risk and incentivise PBII. The agenda could be best supported through national-level activities that:
- Catalyse private sector capital more actively. Deploying tools and incentives to mitigate risk and crowd-in private sector capital.
- Increase capacity to engage with private investors. Empowering places to engage with potential private sector investors, backed by the best local organisational structures to enable agile interactions.
- Identify and showcase pioneering PBII pilots. Exploring opportunities and challenges for delivery, with evaluation leading to fine-tuning of the approach.
- Financial institutions will need to embark upon a programme of culture change to embed both place and impact in their operations. To realise PBII’s potential, financial institutions should:
- Dedicate financial and human resource to the approach. Engaging active and visible senior-level support as well as the right specialist resources to develop new funding opportunities beyond business as usual.
- Focus on a select number of PBII relationships. Creating replicable models that can be scaled up as well as transferred to other places.
- Create products and approaches which explicitly enable place partnerships. Designing financial models that can overcome barriers and promote enhanced positive impact, particularly low income and deprived communities.
- Places need the capacity and knowhow to meaningfully engage in this opportunity. It would be a mistake to see PBII as a solely private sector-led approach, with places as reactive. Places can participate fully if they:
- Articulate clear development priorities and goals. Setting the context for new PBII relationships and engagement, building on existing development strategies.
- Focus and commit resource for engagement with private sector partners. Building on strategic commitments with appropriate technical and delivery capacity.
- Connect investment with community needs. Representing local engagement and requirements while working with new partners.