Take up of “impact investing” among UK pension funds is set to double within two years, with nearly half of schemes planning to put money behind socially beneficial projects.
A survey of 47 pension funds, with £143bn of assets under management and 4.5m members, found 48 per cent plan to invest in either green energy, social housing, microfinance or infrastructure in the next 12-24 months.
This is double the 23 per cent that hold such investments at present, according to Social Finance, a social investment intermediary, and Finethic, which runs a Luxembourg-based microfinance fund.
“Impact investment is a visible asset with clear cash flow, stability and low correlation to other asset classes,” said David Hutchison, chief executive of Social Finance.
One of the stumbling blocks to increasing allocations to impact investing is its modest capacity. Social Finance said many pension funds required a minimum of £200m for a viable investment, a size mostly beyond the current investment opportunity.
The next step is “to bridge the gap between investing and capacity by setting up more diversified, larger funds,” said Mr Hutchison.