Institutional investors and managers in the UK predict significant growth in the impact investing market, with place-based investing gaining the most momentum, according to a Pensions for Purpose survey.
UK institutional investors and managers believe that the country’s impact market will grow substantially over the next decade, according to the latest survey from Pensions for Purpose, the UK-based platform.
The survey was conducted amongst asset owners and managers representing over $11trn (€10.1trn) in assets under management (AUM), $438bn of which were comprised of pension assets. It showed that impact investing could grow to represent up to 15% of assets by 2030, a substantial rise from the 1% that they are today.
While 45% of respondents expected growth to account for 3%-5% of AUM by the end of the decade, a further 35% saw an even larger increase, predicting growth of 5%-10%. An additional 20% of respondents believe that growth could hit as high as 10%-15% over the period.
“The widespread belief that impact investing will move from niche to mainstream reflects the increasing demand for investments that align with environmental and social goals. The diversity of opinions also highlights the dynamic nature of the sector, with different regions and sectors likely to experience varying levels of adoption and integration,” said Charlotte O’Leary, CEO of Pensions for Purpose.
Growth of place-based investing
A key trend to emerge from the survey was the rising appetite for place-based investing, where allocations are made to initiatives that benefit specific local communities, boosting social, economic, and environmental wellbeing. Investors indicated a strong shift to this approach, with 30% of respondents considering place-based investments in the next year. An additional 25% of attendees reported that they have already allocated funds to place-based investing, while 20% said that their organisations currently offer place-based investment solutions.
Place-based investing has been gaining momentum in the UK for some time, as previously reported by Impact Investor. In June, for example, a £10m (€11.8m) place-based impact investment by the South Yorkshire Pensions Authority (SYPA) – which manages £10.9bn in assets – played a key role in getting a new state-of-the-art office building project off the ground in Sheffield, a city based in South Yorkshire in north-central England.
Survey participants said that infrastructure was the most attractive sector for place-based investing, which was selected by 35% of respondents, highlighting the importance of infrastructure in community development, said Pensions for Purpose.
Nature-based solutions was also a strong favourite, chosen by 30% of respondents, highlighting a rising interest in biodiversity and in climate change solutions. A further 25% of respondents also identified real estate as an area of interest, particularly in sustainable and environmental issues such as reforestation and ecosystem restoration.
Climate action
The majority of investors and managers surveyed – 60% – feel that the UK government will meet its goals of reducing emissions by 68% by 2030. However, not all respondents felt this way.
“It’s clear industry leaders believe in the potential for real progress. However, the 40% who voiced concerns reminds us that there is work to be done to overcome challenges like economic pressures and implementation hurdles. Collaboration between investors, businesses and policymakers will be needed to ensure we meet these targets and also drive the broader transformation toward sustainable finance. The growing interest in impact investing and place-based opportunities highlights the industry’s commitment to creating financial returns and meaningful, lasting positive impact,” said O’Leary.
