UK pension schemes seem to be taking impact investing increasingly into consideration, more specifically social infrastructure and affordable housing.

According to a survey conducted by Pensions for Purpose and sponsored by Big Society Capital researching UK pension funds with total assets under management of around £150bn (€180bn), more than 50% of schemes hold some form of impact investment which focuses on positive social or environmental outcomes as well as financial returns.

It also shows that 90% of respondents are looking to make impact investments in the UK. Of the schemes already making impact investments, these account for almost 5% of their total assets under management.

Social infrastructure – such as hospitals and schools – and social and affordable housing are the most popular social impact investments for these investors, with 78% and 44% investing in these areas, respectively, the research disclosed.

But when asked which of the UN’s Sustainable Development Goals the funds were targeting, those relating to the environment were the most commonly cited with 100% intent on to targeting climate action, it said.

The survey also concluded that more education is welcomed by scheme managers and trustees to improve their awareness of social issues and suitable impact investment products that help provide solutions to those issues.

Charlotte O’Leary, chief executive officer of Pensions for Purpose, said: “UK pension funds represent £2.2trn in assets (according to the 2019 ONS survey) and that is only going to grow with auto-enrolment. This represents a significant pool of capital that can be allocated to not just mitigate the risks associated with climate change and social inequity but also to invest in the solutions to those systemic risks.”

She added that impact investing provides the perfect opportunity to revisit allocations to private markets, recognising that opportunities in social impact investment do exist and are being made by pension funds around the UK.

Katie Fulford-Smith, investor relationships director at Big Society Capital, said: “Our investments must help society level up to enable the green transition – and with pension funds now being worth a total of £2.2trn, they have considerable power to help achieve this.” The social impact investment market, she added, is growing considerably, having rocketed nearly eight-fold from £833m in 2011 to £6.4bn in 2020.

“To meet this demand, we are working to increase the number of investment options in social impact and improve understanding of the vast benefits to the investor and investee,” Fulford-Smith said.

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