Cash-strapped UK government turns to impact investors to help fund election pledges delivery
Treasury-hosted meeting of impact investors, including Schroders, Resonance and Better Society Capital, results in announcement of £550m to tackle the UK’s housing crisis and hopes of cross-departmental commitment to boosting the impact economy.
UK ministers this week threw their weight behind impact investing as the recently installed Labour government seeks to attract private investment to deliver on its pledges despite a massive shortfall in public finances.
Ministers including chief secretary to the Treasury Darren Jones and culture secretary Lisa Nandy met impact investors and sector representatives yesterday at a “social impact investing roundtable” in an effort to find ways of boosting impact investment in the country.
One of the outcomes was an announcement that the government had secured £550m of investment to tackle the housing crisis, to fund the building of tens of thousands of new homes. This includes mostly private capital raised by social impact funds.
Jones (pictured) said: “Investors tell us they want to help in delivering a better Britain. Working in partnership with government, social impact investing can change people’s lives and improve communities across the country.
“We are dedicated to creating the right environment for impact investment across the country, and the announcement of over half a billion pounds-worth of impact investment building tens of thousands of new homes is a great example of the change we’re delivering on.”
The Treasury-hosted meeting confirms reports mentioned in Pioneers Post that ministers are keen to give impact investing a more central place in government through cross-department cooperation that would fully recognise the economic potential of impact investing.
Nandy and Jones were joined at yesterday’s meeting by large investors such as Schroders, M&G, International Bank of America, BlackRock and Barclays, which have some sustainable and impact investments among their portfolios, as well as UK social investors including Better Society Capital, Resonance and Bridges, and sector representative body the Impact Investing Institute.
We are dedicated to creating the right environment for impact investment across the country – chief secretary to the Treasury Darren Jones
The £550m of investment into social and affordable housing is made up of the following impact funds:
- Resonance’s £250m fund to tackle homelessness (growing from £79m), backed by equity investments from Esmee Fairbairn Foundation, Better Society Capital and the Access Foundation for Social Investment
- Schroders’ housing impact fund, which targets a final size of £200m including £50m new money from government agency Homes England
- Man Group’s recently-announced £100m investment in its affordable net-zero housing fund
The cash-strapped UK government is desperate to mobilise private investment to support the growth of the economy, and hosted an “International Investment Summit” on Monday in an effort to bring in foreign investors into the country, which resulted in more than £60bn of new investment announced for the UK.
Nandy (pictured) pointed out that the housing funds were an example of how impact investing could be used as a way to tackle “some of the most pressing social and environmental challenges while driving economic growth”.
She added: “I want to make the UK a world-leading centre of excellence on the impact economy and look forward to working with the sector to unleash its full potential for our country.”
At the heart of government
The presence of both Jones and Nandy indicate that the Treasury and DCMS departments are ready to work together to boost the sector.
Stephen Muers, CEO of Better Society Capital, said: “It is encouraging that government is clearly taking impact investment seriously and understands the contribution that the sector can make to its missions. The fact that cabinet ministers from both Treasury and DCMS were there was an encouraging sign of focus from across Whitehall.
“I would temper that by noting that this is just the start, it was one meeting and there’s a lot more to do to turn potential collaboration with government into reality.”
Kieron Boyle, CEO of the Impact Investing Institute, said the meeting was an opportunity “to explore how government can harness impact investing to support its missions… It was powerful to see leadership from across government so committed to this agenda.”
Themes discussed at the meeting included social outcomes contracts and blended finance, which Better Society Capital sees as “promising avenues for ministers to explore”, according to Muers. He added: “We look forward to more concrete proposals further down the line.”
Some of the larger investors present wouldn't usually be considered impact investors, but Muers told Pioneers Post that it was important to “get a broad range of investors involved” given the scale of the social problems facing the country.
He added: “I welcome dialogue with a wide range of potential participants in impact investment about how we can use it to tackle these problems, even if they are coming from a different starting point. We won’t agree about everything but I’m in favour of an open conversation to explore what might be possible.”
Top image: Thanks to one of Resonance's housing funds, Paul has turned his life around through having a secure and stable home. Watch the film by David Pardoe for Pioneers Post.
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