Place-based impact investing: Emerging impact and insights

Published on
20th May 2024

Over the past few years, the expansion of place-based impact investing (PBII) has been apparent on various fronts. Pension funds and other asset owners are increasingly seeking local investment opportunities. This trend is prompting asset managers to seek out investments that yield tangible local benefits alongside financial returns. At the same time, many local authorities are grappling with severe financial challenges, leading them to explore how to build effective partnerships with private investors that foster local economic regeneration.

The Institute has been at the forefront of these developments, offering thought leadership and the critical ‘connective tissue’ between people and organisations across the ecosystem to foster conducive conditions for the expansion of PBII.

Our latest short report provides a snapshot of the evolving PBII landscape since the publication of our joint white paper Scaling up institutional investment for place-based impact, developed in partnership with The Good Economy and Pensions for Purpose, which explored the opportunities for institutional investment to take a place-based approach. Our new report highlights:

  • The emergence of a PBII market, with increasing awareness and adoption of PBII as an approach and the allocation of capital to place-based impact.
  • How government is using public funding to leverage private finance for local impact.
  • Our work and the work of others to connect investors to opportunities – including our PBII pilots, Place Coalition, and support for the growth of the community development finance institution (CDFI) sector.
  • Some of the barriers that are holding back PBII from reaching greater scale.
  • Some of the pathways to scale and spread PBII.

Across these strands, some of the key insights and impacts delivered through our work and by the wider field include:

The supply of capital seeking place-based impact investment is increasing.

Local Government Pension Scheme (LGPS) capital invested locally. Over the past few years, there has been a marked increase in LGPS investments in PBII sectors in the UK, catalysing innovative strategies for scale and diversity. Encouragingly, a recent survey indicates that 64% of LGPS funds are planning to increase their commitment to local investments, signalling a significant shift in the sector.

There is an increasing demand for impact capital

Local government driving change. Local and combined authorities are becoming increasingly proactive in seeking partnerships with private sector investors – in particular, where new devolved powers and funding enable more flexibility. The Institute’s ‘place pilots’ in Wakefield and Southampton contribute to this growing field by supporting local authorities to build the capabilities to engage more effectively with investors seeking aligned societal outcomes.

Rise of UK focused impact investment funds. The market is experiencing a growth in investment products targeting positive local outcomes, such as Schroders’ Real Estate Impact Fund and Octopus’ Affordable Housing Fund. LGPS funds are providing significant capital for these types of funds; for example, Gresham House’s Sustainable Infrastructure Fund secured £450 million investment from 8 LGPS funds.

The enabling infrastructure to support PBII is being built

Advancing blended finance solutions. Blended finance mechanisms, such as the UK Infrastructure Bank’s loan guarantees, are demonstrating the catalytic potential of blended finance. The Institute has led a collaborative design process to develop a model for a blended finance national scale fund for the CDFI sector.

Growing the PBII movement. The Institute’s Place Coalition and partnership on the PBII Network (hosted by The Good Economy), together comprising over 50 core members and engaging many more, have emerged as instrumental platforms for collaboration and knowledge exchange. These groups have facilitated dialogue and fostered trust-building efforts, with insights advancing PBII practices.

Guiding investor engagement. The Institute’s comprehensive guide on community engagement practices in PBII provides a key resource for investors seeking to be more proactive in ensuring stakeholders play a central role in investment decision-making processes.


Related files

Place-based impact investing: Emerging impact and insights

File published on 20th May 2024