- Survey of UK pension funds with c£150bn AUM shows over half have already made impact investments
- All pension funds are considering investments related to Climate Action
- Social Infrastructure and Social and Affordable Housing are the most common social impact investments targeted
London, 8 March 2022: A survey of UK pension funds, representing total assets under management of c£150bn, reveals that just over 50% hold some form of impact investment (an investment that is focused on positive social or environmental outcomes, as well as a financial return). The research, conducted by Pensions for Purpose sponsored by Big Society Capital, shows that UK pension funds are increasingly taking impact investing into consideration, with 90% of respondents 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.
But when asked which of the UN’s Sustainable Development Goals the funds are targeting, those relating to the environment were the most commonly cited with 100% intent on to targeting Climate Action. A greater awareness of product and environmental issues were cited as the main reasons why more funds are being directed to environmental impact investments, rather than social. For example, 58% cited a greater awareness of climate issues than social ones and 42% reported a lack of suitable social impact investment products.
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, Pensions for Purpose said: "UK pension funds represent £2.2 trillion 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. While other pension fund markets around the world have reallocated capital to increase private investment, the UK has lagged behind. 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. This report highlights the perceived and real challenges and solutions in social impact investment with some very powerful case studies, but there is no doubt that more education and greater transparency is required in the market".
Katie Fulford-Smith, Investor Relationships Director, Big Society Capital said: “It is right that pension funds are directed towards mitigating the impact of climate change, but supporting communities and tackling some of our most pressing social issues goes hand in hand with successfully reaching net zero. When people’s primary focus is shelter and food, greener living is not a consideration. Our investments must help society level up to enable the green transition – and with pension funds now being worth a total of £2.2 trillion, they have considerable power to help achieve this. Fortunately, the social impact investment market is growing considerably, having rocketed nearly eight-fold from £833 million in 2011 to £6.4 billion 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.”
Read the full report here:
Notes to editors
Pensions for Purpose and Big Society Capital surveyed 17 UK pension funds and 4 advisors in total. The pension funds represent a total AuM of c£150bn.
Pensions for Purpose exists as a bridge between asset managers, pension funds and their professional advisers, to encourage the flow of capital towards impact investment. Our aim is to empower pension funds to seek positive impact opportunities and mitigate negative impact risks.
Pensions for Purpose offers three types of membership: Influencers: 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 our website.
Influencer members can share (via links to their own website or PDF) thought leadership, case studies, blogs or event details that discuss issues surrounding impact investment.
Affiliates: asset owners, government bodies, independent advisers and journalists. Whilst much of the information on the Pensions for Purpose website is publicly available, Affiliates can access additional, exclusive, Affiliate-only material. They can also sign up for alerts to Pensions for Purpose press releases plus a regular e-mail with an update of new content.
Network supporters: peer organisations that would like to publicly express support for Pensions for Purpose and who have a similar commitment to raising the profile of impact investment.
About Big Society Capital
Big Society Capital exists to improve the lives of people in the UK through social impact investing. We unite ideas, expertise and capital to create investment solutions for the UK’s social challenges, supporting organisations that deliver both positive social impact and sustainable financial returns. So far, we have helped channel £2.5 billion* into investments tackling a wide range of problems such as homelessness, mental ill health and childhood obesity.
To widen access to social impact investing, we have partnered with Schroders, a global asset and wealth manager, to launch the listed Schroder BSC Social Impact Trust plc. As the portfolio manager, we provide investors with high impact investments that contribute to solutions to social challenges alongside targeting long-term capital growth and income.
Further information about Big Society Capital can be found at www.bigsocietycapital.com
*As at September 2021