Q&A: Impact Investing Institute’s Shadi Brazell

An intentional approach to place is required if economies are to work for all, says Shadi Brazell, senior programme manager at the Impact Investing Institute.

What does place-based impact investing entail?

Shadi Brazell, Senior programme manager, Impact Investing Institute

Place-based impact investing is investing with the intention to yield risk-adjusted financial returns as well as positive local impact, with a focus on addressing the needs of specific places. It is important to understand that this is not a one-size-fits-all approach, but that the focus is on intentionality. An economy that works for all requires an intentional approach to place, which is what place-based impact investing offers. 

The opportunities are mutually reinforcing. Financial institutions can create new markets for commercially viable investments that generate social and environmental benefits, while places can gain access to previously untapped capital to fund transformational local growth without over-reliance on grants.   

What role can the private equity industry play here?

Place-based impact investing can be used across all asset classes, but UK private equity lends itself particularly well to it, as small and medium-sized businesses, renewable energy and urban regeneration are well suited to deliver place-based impact. 

What challenges arise for institutional investors looking to begin place-based impact investing?

The Impact Investing Institute has identified five key barriers to place-based impact investing. This includes a lack of awareness of the concept, a lack of appropriate financing vehicles through which to invest, and a lack of impact measurement frameworks. Another issue arises around the origination of investible projects, making it difficult to connect institutional investors seeking to adopt place-based strategies with the fund managers and enterprises that meet their needs. Lastly, there is a general lack of capacity and capability across issues around place-based impact investing within many key organisations, including local authorities, financial institutions and government.

The Impact Investing Institute addresses these challenges through our Place-Based Impact Investing Adopters Forum, which we run with Pensions for Purpose and the Good Economy, and our partnership with Wakefield Council, in which we are identifying projects with the potential to attract private impact investment into the area. 

How much appetite is there currently for a place-based approach among UK pension funds?

There is growing appetite for a place-based approach among UK pension funds. We are hearing from asset managers that their pension fund clients are increasingly asking about the geographical location of investments. In some cases, local investing is linked to pension funds’ emerging net-zero strategies. 

The UK government’s February 2022 Levelling Up White Paper included a target for all Local Government Pension Scheme funds to allocate 5 percent to local investing. If achieved, this would unlock £16 billion ($17 billion; €18 billion) for local investing, more than matching public investment in the government’s £4.8 billion Levelling Up Fund and associated initiatives.