(Commonwealth_ In recent years, social impact investing has gained significant traction as a way to address key societal challenges, including the UK’s housing crisis. Pension funds, in particular, are playing an increasingly important role in this space, directing substantial investments toward affordable housing initiatives. One prominent example is Wiltshire Pension Fund, whose investment and accounting team lead, Chris Moore, highlights the advantages of this investment approach.
“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,” said Moore. His comments reflect the growing recognition among institutional investors that social impact investments can generate both financial returns and meaningful societal benefits. Moore further emphasized that affordable housing investments deliver positive impacts, especially for individuals and families priced out of homeownership in the increasingly insecure private rental market. These investments align with the fund’s broader mission to deliver financial stability while addressing social issues.
Social Impact Investment: A Response to Housing Inequality
Social impact investing focuses on generating both financial returns and positive social or environmental outcomes. In the UK, the housing sector has emerged as one of the key areas where such investments can make a significant difference. Affordable housing, in particular, is seen as a crucial component of efforts to reduce homelessness, improve living standards, and address the wider issue of social inequality.
Research conducted by Big Society Capital (BSC), a leading social impact investment organization, underscores the importance of high-quality housing. The findings reveal that investors are increasingly motivated by a desire to tackle social issues such as homelessness, alongside achieving solid financial returns. This trend highlights the growing demand for investments that not only provide a return but also contribute to social good.
Government and Private Sector Collaboration
The UK government has also recognized the potential of pension fund investments in addressing the housing crisis. A forthcoming review of the pensions landscape, scheduled for this autumn, is expected to explore ways to reduce barriers to pension fund investments in key sectors such as housing. This review could potentially unlock new opportunities for pension funds to increase their investments in affordable housing projects, providing both a financial return and significant social benefits.
One recent example of the growing collaboration between pension funds and the housing sector is the £350 million partnership between Legal & General, UK pension scheme Nest, and Dutch pension fund service provider PGGM. This partnership aims to build and manage rental properties across the UK, further highlighting the role of pension funds in addressing the country’s housing challenges. Stephen Muers, CEO of BSC, emphasized the importance of these investments, stating, “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, whether that’s in housing, social inequality, or the disparity in health and well-being across the UK.”
Muers pointed out that with Labour’s focus on growth, there is a unique opportunity to shape policies that encourage more capital to flow into impactful projects, including affordable housing. These projects not only benefit society but also ease the financial burden on the treasury and support the broader economy.
The Labour Party has a strong legacy in the area of social investment. Stephanie Peacock, Minister for Sport, Media, Civil Society, and Youth, spoke about Labour’s historical role in championing impact investing, noting that Gordon Brown played a pivotal role in establishing the idea of social bonds for impact investment.
