About the Impact Investing Institute

The Impact Investing Institute is an independent non-profit organisation aiming to transform capital markets to support a fairer, greener, and more resilient economy. Its place-based impact investing (PBII) programme is funded by the Department for Culture, Media and Sport (DCMS), with additional contributions from Wakefield District Council, Southampton Forward, and Lloyds Banking Group. The programme builds on the 2021 white paper Scaling Up Institutional Investment for Place-Based Impact, developed with The Good Economy and Pensions for Purpose.

Introduction

The report addresses persistent regional inequalities across the UK and explores how institutional investors can contribute to local economic regeneration. The government’s levelling-up agenda has committed £11 billion to revitalise towns and high streets, yet over £1 trillion in further investment is needed over the next decade. Institutional investors—including pension funds, asset managers, and insurers—can mobilise large-scale capital towards affordable housing, renewable energy, and infrastructure.

Barriers to private investment outside London include a shortage of investible projects, limited local government capacity, and weak links between investors and localities. PBII is presented as a framework to align public, private, and community capital, fostering collaboration to meet regional social, environmental, and economic needs.

Increasing Awareness And Adoption: Building The Field And Getting Capital Committed
PBII has gained traction among investors, local authorities, and policymakers. The government’s Levelling Up White Paper adopted the Institute’s recommendation that 5% of Local Government Pension Scheme (LGPS) assets—totalling about £400 billion—be invested locally. Surveys show 64% of LGPS funds plan to increase local investments, with 70% expanding private market exposure, particularly in renewable energy and sustainable infrastructure.

Local authorities such as Wakefield, Southampton, and Essex have used PBII pilots to attract private investment in regeneration, clean energy, and small business finance. Combined authorities like the West Midlands and North East have launched large-scale PBII-linked initiatives worth up to £5 billion in private investment.

Several PBII-aligned funds have emerged, including Schroders’ Real Estate Impact Fund, Octopus’ Affordable Housing Fund, and Gresham House’s £450 million Sustainable Infrastructure Fund. These initiatives signal increasing market maturity.

The Good Economy’s PBII Reporting Framework standardises impact measurement, adopted by Greater Manchester Pension Fund and others. Public finance tools, such as the UK Infrastructure Bank’s £12 billion in capital and DEFRA’s Local Investment in Natural Capital programme, are helping leverage private finance through blended models.

Remaining challenges include expanding investor participation, increasing the number of localities adopting PBII, and developing more blended finance mechanisms.

Connecting investors to opportunities: Forging new paths and possibilities

The Institute’s PBII pilots connect investors and local authorities to co-design investible solutions. Wakefield’s pilot identified regeneration, clean energy, and SME growth projects, while Southampton’s focuses on culture-led regeneration. These efforts have attracted collaboration with pension funds, construction firms, and community finance institutions.

Key insights highlight that PBII success depends on local leadership, capacity building, and trust between investors and communities. Both investors and local authorities require improved capability to identify, structure, and present opportunities. Early investor engagement, clear asset data, and standardised prospectuses are critical.

PBII encourages multi-asset, cross-sector investment strategies—linking housing, infrastructure, and social economy projects—to maximise community benefits. Community engagement is also emphasised as improving both outcomes and financial performance.

The Institute’s 2023 guide Fostering Impact outlines how involving communities enhances trust, risk management, and investment success.

The Institute’s evolving PBII approach involves stages from asset mapping and coalition building to investor engagement and impact measurement. It encourages SME growth through partnerships with community development finance institutions (CDFIs) and supports blended finance innovation.

Unlocking the potential of the community development finance institution (CDFI) sector

Around 700,000 UK small businesses face barriers accessing finance. CDFIs provide affordable lending to enterprises overlooked by mainstream banks, supporting inclusive growth. In March 2024, the £62 million Community Investment Enterprise Fund (CIEF) was launched to back 750 small businesses and 10,000 jobs, with at least half of investments targeting the most deprived areas.

The Institute, Lloyds Bank, Better Society Capital, and Responsible Finance are collaborating to scale this sector. Efforts include engaging commercial banks, modelling a blended finance national fund, building CDFI lending capacity, and improving sector data transparency.

What next: Pathways to scale and spread Place-Based Impact Investing

In 2024–25, the Institute will expand PBII activities through investor engagement events, continued place pilots (including Southampton), and the Place Coalition forum. Priorities include increasing the number of local authorities using PBII, developing communities of practice around community engagement, and promoting blended finance innovation through “finance labs.”

An annual PBII conference is proposed to consolidate learning, share best practice, and attract new investors and partners, further embedding PBII as a mainstream investment approach across the UK.