An analysis of the role social infrastructure plays in local government pension scheme (LGPS) portfolios found that the vast majority invested in themes delivering a positive impact. The report, published by Octopus Investments and mallowstreet, noted that 96% of the 27 schemes invested in clean or renewable energy, while 64% invested in sustainable infrastructure. In addition, 60% had allocations in both affordable housing and healthcare. “The shortage of homes in the UK, whether that’s care homes or affordable homes, continues to be a problem which is unlikely to be solved by government funding alone,” said Ally Georgieva, Head of Insight at mallowstreet. “The investment gap still looms large, so it is encouraging to see support for collaboration between asset owners and managers, in efforts to come up with viable solutions that can benefit all stakeholders.” Forty percent of the LGPS schemes are targeting natural capital – a figure higher than expected, given the nascent nature of the market. The analysis also found that 63% of schemes consider affordable housing as the most important area for social impact, with 41% seeing community and urban regeneration, and 22% seeing healthcare – including retirement communities, care homes and specialist care – as key areas. “It is great to see 63% of LGPS selecting affordable housing as the most important area for social impact,” said Jack Burnham, Head of Affordable Housing at Octopus. “However, aside from the impact, the sector offers resilient, risk-adjusted financial returns too. In general, affordable housing has low correlation to other property markets and the wider economy.” Seventy-four percent of assessed schemes said they invested in social infrastructure due to its risk-return profile and diversification benefits. In addition, the conflict between fiduciary duty and impact-focused investing was flagged as a concern by 48% of respondents.
