In brief: UK pensions ‘becoming more involved in impact’, says bfinance

Some pensions are getting more comfortable with the 'relatively immature' market for impact funds, bfinance's Anna Morrison says.

Are UK pensions too risk averse to invest in impact funds? Not according to investment consultant bfinance.

“We do see UK pension funds becoming more involved in impact investing without compromising their fiduciary goals,” Anna Morrison, senior director, private markets at the firm, wrote to New Private Markets.

Morrison was responding to the idea in this report that risk aversion was preventing the pensions industry from channeling enough capital towards impact investments.

“The conversation is shifting from ESG integration towards the positive outcomes that investors want to effect through their capital,” said Morrison. “This is important not only to existing beneficiaries of schemes but to the newer, younger cohort of employees that wish to see a sustainable world into which they can eventually retire.

“Our analysis shows that impact private equity and venture capital funds can play a useful role in portfolio construction as part of broader private equity portfolios, bringing additional potential alpha generation and diversification.”

Impact investing strategies undertaken by the likes of The Greater Manchester Pension Fund, Essex Pension Fund and Clwyd Pension Fund show how varied approaches and motivations can be.

“If UK pension schemes and other investors want to contribute towards the transition to a more sustainable world, it is well worth considering how to get comfortable with the relatively immature impact private equity sector and mitigating the risks involved,” said Morrison.