Pension funds are predicted to increasingly invest with impact, according to a survey by the Impact Investing Institute and EY, the professional services firm.
The UK impact investing market had an estimated £58bn in assets under management at the end of 2020. Only 1 per cent of this figure was attributed to pension fund managers.
But pension funds, asset managers and family offices were seen as the primary drivers of future growth given the scale of capital they control, a survey for the report found. The wider pensions market was at £4tn at the end of 2020, the Investment Association estimates.
A challenge to the growth of impact investing is the “common misperception” by pension trustees that their fiduciary duties are incompatible with impact investing, the report says, with an exclusive focus instead on optimising financial return at the lowest possible cost, and within pre-defined risk parameters.
Charlotte O'Leary, CEO at Pensions for Purpose, which encourages the flow of capital towards impact investment, says: “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 environmental and social impact investment do exist and are being made by pension funds around the UK.
“Our research has demonstrated the perceived and real challenges and solutions in environmental and social impact investment, but there is no doubt that more education and greater transparency is required in the market.”
Chloe Cheung is a features writer at FTAdviser
