The government's plans to reform the Local Government Pension Scheme (LGPS) offer a "compelling opportunity" for local investment, according to Better Society Capital (BSC) and the Impact Investing Institute.

Following the Chancellor's Mansion House speech in November, the government launched a consultation on plans to create LGPS 'megafunds' by requiring the 86 LGPS administering authorities (AA) to consolidate their assets into fewer, larger pools of capital.

Whilst industry experts have been broadly supportive of the objectives behind the reforms, concerns have been raised over accelerated timelines and potential conflicts of interest.

However, BSC chief investment officer, Anna Shiel, claimed the reforms present a significant opportunity to boost local investment and reduce place-based inequality in the UK and should be embraced by LGPS pools.

"The reforms must be implemented in a way that makes the most of this opportunity while considering current barriers and opportunities in the market," she said.

In their response, BSC and Impact Investing Institute highlighted place-based impact investing as a powerful tool for driving positive change in communities across the UK, with growing opportunities to invest in areas such as social housing, small business and renewable energy as well as emerging markets, including social infrastructure, natural capital and preventative health.

They stressed that local investment does not always preclude scale, identifying social and affordable housing as an area that could have a transformative effect on the people in a local area.

Scaling in substantial private capital here will be essential to increasing the well-being and growth of local communities, they added.

Both organisations warned that a collaborative approach with local authorities and other stakeholders is vital so they can shape investment solutions that are right for them.

They said local authorities and LGPS officials may need to be upskilled in local impact investment practices and business models, particularly where they may lack the clarity and confidence to present investible propositions.

Shiel added: "We champion place-based impact investment strategies for their combination of financial returns and quality impact on the ground. We want to support LGPS pools in executing meaningful investments as effectively as possible."

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