The UK local government pension schemes (LGPS) and their investment pools are advocating for a strategic framework based on place-based investing.
In response to UK government calls to invest in Britain, LGPS and their pools have come together by sponsoring a report by impact advisory firm The Good Economy – Scaling-up local investing for place-based impact: A strategic framework and guidance for LGPS – which examines how the sector can balance place-based investing to support locally-defined priorities while balancing fiduciary duty.
The guidance has been developed collaboratively with the support of seven LGPS pools representing nearly all administering authorities in England and Wales, which came together recognising the need for a framework to guide the development of local investment strategies.
Its sponsors include Border to Coast, Brunel Pension Partnership, LGPS Central, Local Pensions Partnership Investments, London CIV, Northern LGPS and Wales Pension Partnership.
Pensions UK, administering authorities such as the Greater Manchester Pension Fund and the West Midlands Pension Fund and leading fund managers including Legal & General Investment Management, Gresham House and Foresight Group have also contributed to the report.
It sets out a strategic framework and practical guidance for local investing by LGPS, guiding the pension funds on how capital can be channelled to support local growth plans while capturing the scale and efficiency of investment pooling – all within a disciplined fiduciary framework.
Key recommendations include a tailored investing approach, which states that local investing won’t work with a ‘one size fits all’ approach. It urged administering authorities and pools to take a context-specific approach, considering each organisation’s economic geography, governance model, and delivery capacity.
The report also argues that success will require active collaboration between LGPS and a range of stakeholders, including strategic authorities, central government agencies and other institutional investors, such as the Mansion House Accord signatories, to deliver investment at scale.
Finally, the report calls on the LGPS sector to collectively establish a common impact reporting standard ensuring consistency, comparability and transparency of impact reporting – and stakeholder accountability for the local economic, social and environmental impact of local investing.
The guidance and framework come in response to government reforms for pension funds and local government, including the UK’s landmark Pensions Investment Review of LGPS, aimed at improving and boosting local investment.
This sits within a broader reform programme that includes devolution, local government reform, housing and planning, infrastructure investment and a new industrial strategy – all aligned with a place-based, decentralised approach to growth.
Local growth plans
The new local growth plans being prepared by strategic authorities are expected to provide the platform through which local government and the LGPS work together to scale-up investment that responds to local priorities in areas such as affordable housing, infrastructure, clean energy and growth businesses.
Sam Monger, head of place-based impact investing at The Good Economy, said: “Despite its global financial strength, the UK suffers from decades of underinvestment. Public funding alone cannot meet growth ambitions, so unlocking institutional capital is essential.”
Monger said that LGPS has a distinct role to play in mobilising local investing across the country and called on pools and administering authorities to work together to set and monitor targets, embedding impact alongside risk and return.
“This journey is only just beginning – LGPS local investing can set new norms for responsible private market investment, delivering robust member returns and long-term value for UK communities,” he added.
Zoe Alexander, director of policy and advocacy at Pensions UK, said: “LGPS is already an exemplar when it comes to investment in the UK. Building investment further – and at a local level – can help generate the additional capital needed for businesses to grow, to build vital infrastructure for communities and develop new technologies that benefit all of society. It also supports the government’s drive to deliver more UK growth.”
Read the digital edition of IPE’s latest magazine
No comments yet