Agenda item

Kieron Boyle, Chief Executive Officer, Impact Investing Institute to be heard.

The Chairman welcomed Kieron Boyle, the new Chief Executive of the Impact Investing Institute (III) and Ida Levine, the lead expert for Policy on the Board of the III and Chair of the Governance, Development and People Group .

Mr Boyle and Ms Levine introduced themselves and spoke on their backgrounds. They addressed the Committee on the subject of securing the UK’s position as a global hub for impact investment. In doing so, he covered four key areas: - the opportunity of Impact Investing (set to be a £26 trillion market by the end of the decade), the partnership between the III and the City Corporation, the III’s key role in supporting the City Corporation’s vision for economic growth and what more might be done in collaboration to secure London as a hub for this global market.

Mr Boyle explained that Impact Investing is about investments which deliver a financial return through attention to environmental and social outcomes. It is about the productive allocation of capital and about commercial returns as opposed to philanthropy. He went on to state that it might be best described as an investment ‘mega trend’, driven by the increased recognition of wider externalities on investment performance (sometimes called Universal Ownership) and the growth in solutions focused businesses – things such as clean energy, healthcare and forestry. Impact Investment was therefore now increasingly at the heart of leading investors’ commercial strategies.

The Committee were informed that impact investments were being deployed at scale by leading capital actors. TPG Rise were cited as a specific example with an investment fund of approximately £17 billion assets under management with commercial capital invested in companies across education, energy and infrastructure. M&G were another example cited with a £5 billion catalyst fund and having deployed £2.5 billion over the past two years to fund things such as access to finance for underserved SMEs in India and AI powered road traffic management platforms. Mr Boyle highlighted that this was a rapidly growing field with estimates showing that the market had doubled in the past 4 years. He added that it was very much a global market with Europe well placed within it. Whilst the majority of impact managers in the world were based out of North America, the majority of assets under management were based within Europe. Within Europe, those assets are then deployed in a variety of places with a slight majority to investments in the global south but with lots of capital also being invested in productive and inclusive growth opportunities. Mr Boyle commented that the UK and London were long-time leaders in this field, particularly Professional Services firms. However, this was increasingly a global competition with countries such as Amsterdam, France and Singapore working hard to present themselves as contenders.

In terms of the Institute itself, Mr Boyle stated that the City Corporation’s support had been fundamental in terms of it positioning itself and London as a global hub for Impact Investing. The Institute has core funding from the City Corporation, central government and the UK’s largest capital markets players – something that was being continuously developed with further investment also being attracted from local authorities and major foundations. Collectively, the Institute were using this market-leading reputation to help position London as primary in this field. In practice this looked like supporting some of the world’s largest investors to put impact at the heart of their commercial investment strategies, showcasing the leading edge of the City of London, acting as a global though-leader via a network of over 100 organisations based around the world and across different aspects of the financial services industry and finally through a track-record of action that moves capital. For example, Mr Boyle reported that the Institute’s work helped the government to issue the first Sovereign Green Bond that had now attracted £25 billion of investment. The Institute had also led a coalition of 110 institutions across 38 countries as part of the G7’s work to mobilise institutional capital towards the Sustainable Development Goals. It was with this platform that the Institute could support the City Corporation’s vision for economic growth.

Mr Boyle reported that the III were pleased to be prominent within the City Corporation’s Vision Strategy. He noted that the Vision referenced world-class promotion of the City and highlighted that the III’s collaboration with regulators had supported world first policies on Sustainable Finance labels on transition plans and the like. He highlighted that lots of other countries were interested in this. He also spoke on the more obvious ways that the III were currently partnering with the City – the first around scaling and accelerating financing for a just transition and the second around raising investment levels within the UK. On just transition, work was taking place to practically orientate trillions of pounds of capital towards a fair and inclusive global net zero economy. With the Corporation’s support, a first of its kind just transition criteria had been developed with over 70 firms around the world including BlackRock and HSBC and asset managers with over £10 trillion of assets under management now trialling the criteria. With ongoing support, the criteria continued to be developed to reach even more investors and to have even greater specificity by asset class and geography. Mr Boyle reported that he was seeing more and more engagement from investors who were very interested in the framework of the criteria and who were becoming very aware that more attention needed to be given to aligning the social and environmental outcomes on the economy in order to secure the societal buy-in for the change needed. With respect to mobilising the power of the City across the UK to support more productive local economic growth, the III were working in partnership with the City Corporation to help Community Development Finance Institutions (CDFIs) to channel more capital into innovative SMEs and were currently developing a model with Lloyd’s Bank which it was hoped would unlock five times the amount going into CDFIs than has been achieved to date. Mr Boyle went on to state that impact investing had a key role to play in Local Government Pension Scheme support for social infrastructure and green energy. The III’s recommendation for a 5% allocation by Local Government Pension Schemes to local investment was endorsed policy in the government’s Levelling Up paper and would constitute £16 billion or approximately 20% of the City’s aspiration of £75 billion reaching local investment. The Committee were informed that the III were working in various parts of the UK in places such as Wakefield, Southampton and Aberdeen to practically showcase what this looked like.

Mr Boyle concluded by underlining that Impact Investing was already a significant market and one which was only set to grow further still. He commented that the partnership between the III and the City Corporation was actively positioning London as a global leader in the field and that the III would be a key partner in terms of delivering the City’s vision for economic growth.

The Chairman thanked Mr Boyle for his presentation ad welcomed any questions or reflections that the Committee might have of him or Ms Levine.

An Alderman commented that the City Corporation’s charity Bridge House Estates (soon to be rebranded as the City Bridge Foundation) had also just created a new Investment Strategy entirely based on the premise of impact investment. She reported that the charity had £1.6 billion in its capital endowment with the majority of this in property real estate. She stated that she was certain that the charity would be actively engaging with the III on this. Mr Boyle commented that City Bridge had also given a grant to the III to work with other charitable endowments looking to make the same journey that they had done.

The Chairman commented that companies and governments had been seen to row back slightly in terms of Environmental, Social and Governance (ESG) and impact investing in the past 12 months. Whilst he recognised that there was still certainly momentum in the sector he questioned how the III saw their voice still being heard in this context. Mr Boyle responded by stating that ESG investing was not the same as impact investing and that the III had not noted any rowing back in terms of impact investing. Mr Boyle spoke on the important differences between the two and that impact investing was considered by many as a more robust approach to sustainable financing as it focused on intentionality and measurability. In terms of the III playing a supporting role here, it was important that they continued to showcase the commercial opportunities that existed around impact investing and also continued to really lean into these frameworks around just transition.

An Alderman queried how the III balanced the equation between financial returns and other social returns. He also questioned what key messages the Aldermen in the room who sat on various investment bodies/boards could best take into those spheres where they may have some influence in terms of allocation of capital going forward. Ms Levine responded to recognise that different groups would have different investment objectives and that it was important to understand this and those that were positioned to put impact first. She recognised that others would need more of a market return. She stated that there was lots of room for all of these different types of investors. Mr Boyle added that impact was both a source of value and a driver of risk and that the pertinent question now was how to make these investment decisions well. He commented that there were some excellent tools available in this respect such as the Impact Management Framework which the III made available to people to take advantage of. He added that the III were also always very happy to be introduced to those making this journey.

An Alderman thanked the III for their support throughout his recent Mayoral year and the fantastic work undertaken by them around the Financial Impact Summit in July 2022. He went on to observe that one of the reasons that he had adopted the theme of Finance for Impact during the course of his mayoral year was that there were profoundly strong capitalist arguments for doing so and that these arguments should be seen in the context of London as a global financial centre. He stated that this was a huge, developing new market and was set to become so deeply embedded within everyday asset management in years to come that it was vital that this be centred in London as part of its asset management offering. He stressed that the work that the III were already undertaking in partnership with the City Corporation to promote this was vitally important. He questioned the government’s current position in this area.

Another Alderman commented that one of the criticisms of impact investment was ‘short-termism’, he questioned to what extent the III recognised this and asked what some of the solutions to this might be. Ms Levine responded to state that, as an impact investor, you had to look to the long term. She commented that there had been a lot of work undertaken by the City and other UK institutions to try and encourage more long-term investing and investment in productive assets. She highlighted that this was at the heart of impact investing.

An Alderwoman queried what barriers there were to businesses in terms of impact investing and also questioned what the III’s biggest challenges to success were. Ms Levine spoke on cultural barriers where organisations felt that they could not impact invest as they were under the incorrect impression that impact investing always had to be without robust return. The role of the III here was to provide information to the contrary. She also spoke of legal issues such as fiduciary duty as a barrier. Mr Boyle stated that the III’s success relied upon forward thinking partners in terms of market building activity. He went on to state that a key challenge for the Institute at present was around fielding all of the interest and demand around this market.

The Chairman thanked both for an very informative presentation.