A Mallowstreet blog on growing a culture of social impact investing in the UK - Pensions for Purpose

In this blog, which originally appeared on the Mallowstreet forum, Karen Shackleton, Head of Pensions for Purpose, draws out some of the market research conclusions in the Advisory Group report: Growing a Culture of Social Impact Investing in the UK.

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On 14th November, an independent Advisory Group to the Department of Digital, Culture, Media and Sport (DCMS) and HM Treasury, published an insightful report on social impact investing in the UK. I was delighted to be involved in this report in several ways: sitting on the Product Working Group that fed into the Advisory Group, as a Non-Executive Director of Resonance who provided a case study for the report, and undertaking some market research via Allenbridge on attitudes towards social impact investing by corporate pension funds. 

Seeing this from so many different angles has given me a privileged insight into the benefits, challenges and misconceptions around social impact investment. I had already tried to address the latter point by setting up Pensions for Purpose in October 2017, a new information platform where contributors share thought leadership, case studies and blogs on impact investment with asset owners. But what were the key conclusions from Allenbridge’s market research of corporate pension funds, which were highlighted in the Advisory Group report?

First, 82% of the pension trustees and pensions managers that we interviewed, felt they lacked hard data on social impact investment. Only 12% described themselves as being ‘well informed’. As with many investment types, the lack of a track record is an issue. Yet Resonance have been offering impact investment opportunities for over 15 years and there are others who have similar track records. They may not be the investment manager names that we know and love, but there is nonetheless data available. I am hoping that an increasing amount of this evidence can be provided via Pensions for Purpose, from these specialist contributors. 

A second insight was the heavy reliance of many corporate pension funds on the views of their consultant. Nearly 70% of trustees placed significant emphasis on their consultant’s advice before changing investments, yet many consultants are only beginning to develop their knowledge of impact investment. Pension funds may need to seek out specialist advice if they are considering impact strategies. 

One of the barriers to entry for DC schemes is the issue of daily liquidity. Many impact investments offer a competitive financial return but require the investor to forego some liquidity. In the Allenbridge survey, 40% of trustees of DC schemes thought there was a requirement for daily pricing and liquidity, although - as the Advisory Group report comments - there is no such requirement. 

The best way forward from here-on is to consider the five key recommendations highlighted in the Advisory Group report:
  • Improve the deal flow and scale of investments
  • Strengthen competence and confidence within the industry
  • Develop better reporting of non-financial outcomes
  • Make it easier for people to invest
  • Maintain momentum and build cohesion across initiatives.
I have, for the past year, been of the personal view that impact investment is an investment opportunity whose time has come. This is a topic that we will hear more about, going forward, and I very much hope to be part of that debate.