Pension funds are the largest UK social impact investors, providing 21 per cent of the UK’s social impact investment, according to analysis by Better Society Capital (BSC).

The research also revealed that by the end of 2023, the UK’s social impact investment market reached £10bn, which BSC said demonstrated stability, despite economic challenges.

The company credited this to an “increasingly” diverse group of investors.

The analysis also found the highest concentration of pension fund investment was in social and affordable housing, which remained stable at £5.1bn.

BSC emphasised the relevance of these findings to the Labour government’s ongoing efforts to develop a strategy and tailor policies that encourage investment in the UK economy.

The government’s review of the pensions landscape will explore ways to reduce barriers to pension fund investments within the UK.

BSC argued that pension funds offer a unique opportunity to align financial returns with social outcomes, making them a “significant” investor in impact.

Commenting on this, Wiltshire Pension Fund investment and accounting team lead, Chris Moore, said: “Affordable housing provides us with inflation-linked income with the potential for long-term capital appreciation – a perfect match for a long-term open pension scheme such as Wiltshire Pension Fund.

“We believe that the positive impacts delivered by investing in affordable housing are completely integral to the investment case. 

“Affordable housing provides very positive benefits to those on lower or median incomes, priced out of home ownership in the less secure private rental sector.”

Adding to this, BSC CEO, Stephen Muers, said: “It is a source of encouragement that the UK social impact investment market grew once again last year.

"However, we must not lose sight of the significant challenges ahead. As we look to the future, it is crucial for investors, businesses, and the government to work closely together to channel investment towards organisations that need it.

“With the Labour government’s focus on growth we have a unique opportunity to shape policies that encourage more capital into impactful projects that benefit society, ease the burden on the treasury and support the economy.”

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