In May 2021, we published our white paper “Scaling up institutional investment for place-based impact” in partnership with The Good Economy and Pensions For Purpose. Alongside setting out the case for institutional investors to adopt a place-based approach, the white paper also highlighted a number of barriers which could prevent investors from doing so, including the lack of appropriate financing vehicles through which to invest.
Our new report, “Financing structures for place-based impact investing – what works?”, tackles this barrier head on, setting out the key characteristics viable vehicles must possess, a variety of structures they can adopt and a set of case studies which demonstrate these principles in practice. Another potential barrier, issues around origination of investable projects, is addressed by our report “Originating place-based impact investments.”
Focusing on Bristol & Bath Regional Capital, Schroder BSC Social Impact Trust plc, English Cities Fund and Social Investment Business Recovery Loan Fund 2, the report’s four case studies showcase models which, taken together, act as the best blueprint the UK can offer for investment products which deliver for investors, communities and places. We know that there is a growing demand from investors for investable entities which deliver positive social and/or environmental benefits in particular regions or localities and we hope these examples can serve as inspiration for the development of new structures.
The final section of the report is comprised of a series of recommendations, targeting three distinct groups: those who are structuring vehicles, government and policy makers and asset owners. These recommendations include:
- Recommendations to those structuring vehicles
- Involve an experienced commercial provider of financial vehicles.
- Where possible, secure subsidy for pre-work and concept due-diligence, or accept higher-than-usual costs for these.
- Connect with a place and secure local authority support.
- Recommendations to Government
- Accelerate private capital mobilisation by making it part of the mandate, policies, allocation frameworks and crucially, incentive structures of organisations like the British Business Bank, UK Infrastructure Bank, Scottish National Investment Bank and national funding programmes across sectors.
- Foster a regulatory environment in which fiduciary duty recognises double materiality, which would ensure that fiduciary duty considerations are not a barrier to place-based impact investing.
- Demonstrate and encourage impact reporting best practice.
- Recommendations to asset owners
- Create and foster cultures which value impact.
- Decide an overall allocation strategy which enables you / your Board to take both place and impact into account when making decisions, and align procurement and governance processes with that strategy.
- Acknowledge and make allowance for the fact that many place-based impact investing interventions and vehicles may be unfamiliar and therefore due diligence may take longer or be more complex than usual.
- Be more demanding of advisors, incentivise them to pursue impact goals and actively seek out investment opportunities and vehicles which achieve them.
Click the link below to download the full report.