Private equity has emerged as the preferred vehicle for impact investing among 60% of pension funds, according to research by Pensions for Purpose and sponsored by Columbia Threadneedle Investments.
The ‘Impact investing in private equity – a UK pension fund perspective‘ study focused on UK local government pension schemes and defined contribution schemes.
It revealed that 60% of respondents see private equity as the most effective means to drive impact.
Pensions for Purpose called on asset managers to enable DC pension schemes to adopt impact private equity within their fee limits, highlighting the untapped potential in this asset class.
It also said the research showed pension funds prioritise impact private equity to secure a sustainable future for their portfolios (33%) and pursue a solid risk and return profile (25%).
Pensions for Purpose claimed that the research debunked the misconception that impact investing compromises returns, with many pension funds seeing financial benefits.
However, the study also highlighted a lack of understanding among pension funds regarding the concept of “additionality” in impact private equity.
Pensions for Purpose emphasised the importance of asset managers creating innovative strategies to make impact private equity accessible for DC schemes. A global perspective on impact investment was also encouraged to address crucial targets like the net-zero transition.
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