There is ‘unmet potential’ among LGPSs for impact private equity, says survey

Most UK Local Government Pension Schemes view private equity as 'the most effective vehicle to drive impact', according to a survey by Pensions for Purpose.

UK Local Government Pension Schemes have started to look favourably on impact private equity, according to a survey by impact investing promoters Pension for Purpose and investment manager Columbia Threadneedle.

In a survey of 17 LGPSs (the UK has 85 in total) and five investment consultants, 60 percent said they viewed “private equity as the most effective vehicle to drive impact”. Just under half of those surveyed (43 percent) said they had invested in impact private equity. “Some pension funds not invested in impact private equity thought it was the best vehicle for delivering positive impact, suggesting there may be unmet potential within the sector,” said Pensions for Purpose.

Key points from the survey, according to Pensions for Purpose:

  • The pensions primarily choose impact funds for financial reasons, but they are also interested in place-based impact. “However, we advocate a global perspective on impact investment to meet crucial targets such as the net-zero transition,” said Karen Shackleton, chair and founder of Pensions for Purpose.
  • The research highlights “an interesting discrepancy” in LPs’ understanding of additionality: “LPs’ lack of understanding of the topic and the difficulties evidencing it meant that additionality was frequently treated as a less critical impact characteristic and consequently, most pension funds surveyed – erroneously – do not seek it.”