The new fund will focus on addressing major social inequality in the UK, which is growing following the COVID-19 pandemic
Schroders Capital, the private markets investment unit of UK-based money manager Schroders Group, is betting investment in real estate can help narrow regional divides.
The London-based group announced this week it is launching a “place-based impact investment strategy focused on delivering positive social impact outcomes” across the UK.
“The COVID pandemic exposed and exacerbated the widening gap in social inequality,” in Britain, said Sophie van Oosterom, global head of real estate at Schroders Capital, which manages $88bn in assets worldwide.
Nowhere in Europe is the gap between the rich and poor bigger than in the UK, according to the OECD. In fact, the regional wealth gap is rising as the country struggles with soaring energy prices, which have led to a cost-of-living crisis.
The UK economy plunged into a recession during the previous quarter, which may lead to the biggest drop in living standards since records began, UK government spending watchdog OBR said last week.
Strategy
Schroders Capital’s UK Real Estate Impact Fund will offer institutional investors “the opportunity to be part of the solution to help address regional inequality through investment in real estate assets in more deprived areas in the UK,” Van Oosterom said.
The firm’s real estate impact investing strategy is aimed at pouring money into areas that have been underserved by more traditional lenders. That means investing in projects “that would otherwise not happen”.
Schroders Capital said it would track its social impact progress in deprived areas through “clear, measurable metrics”, and that it typically aims for a net return of between 7% and 8% per year.
“Real estate is uniquely placed to help address major social inequalities across the UK,” said Chris Santer, impact fund manager at Schroders Capital’s real estate team.
“Through our focus on deprived areas and working to understand the needs of local communities, we believe we can deliver place-based real estate solutions driving social change together with long-term financial value for investors.”
The new fund will mainly focus on regions defined as deprived by the UK government. It will try to find solutions to social challenges faced by a range of beneficiaries, including low-income families, community groups, social enterprises and small and medium-sized businesses.
