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Working together on impact investing

Karen Shackleton
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Recent discussions had by LGPS around environmental, social and governance (ESG) and socially responsible investing (SRI) have led to growing interest in a different type of investment known as ‘impact’.

Impact investments generate a financial return but also have a positive social or environmental impact. For many LGPS funds, discussion around impact investment is part of their wider ESG journey and larger schemes are already beginning to allocate to these investments.

There remains, however, confusion over what an impact investment actually means; must financial return or other variables, such as liquidity or fund size, be traded off in order to achieve impact and how is impact measured? For many, impact investment is associated with concessionary capital such as philanthropy, which would not be suitable for a local authority pension fund that has a fiduciary responsibility to target the best risk adjusted returns, taking the liabilities into account. Yet the impact space has been evolving in recent years, with innovative and impactful strategies now being brought to the market that offer a financial return as well as having a positive societal or environmental impact.

With this in mind, in October, a new platform called Pensions for Purpose was launched. The aim of this collaborative, web-based initiative is to promote pension funds’ understanding of impact investment by collectively sharing news stories, blogs, case studies, academic research and thought leadership papers on impact topics. The idea was the brain-child of a discussion at The Gathering, an event in February 2017 which brought together 130 of the UK’s most active participants in social investment to discuss the most pressing issues in this sector.

Pensions for Purpose classifies its members as influencers and affiliates.

Influencers are investment managers involved in impact investment, either for part or all of their business; trade bodies; consultants; and others involved in impact investment who wish to post content on the Pensions for Purpose website.

Influencer members can share thought leadership, case studies, blogs or event details that discuss issues surrounding impact investment. Articles from different firms may offer a different perspective, but it is hoped that this will help LGPS officers, committee members and their advisers gain a more holistic view of the issues surrounding impact investment. With the Markets in Financial Instruments Directive II coming into force in January 2018, committees will need to demonstrate strong knowledge and understanding of their investments, and accessing different articles about impact investing, from one central site, should make this task easier. Pensions for Purpose has a very strict policy that no funds can be promoted on the website, so that it remains a genuine knowledge-sharing platform.

Affiliates are asset owners, government bodies, independent advisers and journalists who are interested in understanding more about impact investment. Most of the material on the Pensions for Purpose website is publicly available but signed-up affiliates can also access additional, exclusive affiliate-only material. Membership also allows them to sign up for alerts to Pensions for Purpose press releases, plus a regular e-mail with an update of new content, so that they can keep abreast of developments in the marketplace.

Although still in its infancy, it is hoped that Pensions for Purpose will embrace both large and small firms operating in the impact space, giving them all an equal opportunity to share their views. Several leading firms have already become founding influencers including Baillie Gifford, Big Society Capital, Bridges Fund Management, Brightlight, Resonance and Sustineri. Information on each of the firms is given on the website under member profiles.

The material on the website is already building up. The knowledge centre has five distinct areas: case studies, events, thought leadership, press releases and personal blogs, all focusing specifically on impact investment. Three LGPS funds – the Environment Agency, Greater Manchester and Merseyside – have shared their own stories about building an impactful portfolio, under case studies. There are videos showcasing the benefits of impact investing and a whole variety of thought leadership articles that link to the influencers’ own web pages, ranging from impact investing in public equities to considerations for introducing a low carbon strategy to how property can have a positive societal impact.

Collaborative initiatives have become commonplace within the LGPS in recent years. Pensions for Purpose has collaboration at the heart of its objectives, with the investment management community adopting LGPS best practice by raising awareness collectively of this purposeful investment approach.

Karen Shackleton, director, Pensions for Purpose

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