One of the UK’s eight Local Government Pension Scheme (LGPS) pools has committed 40% of a new investment vehicle to impact investing (social or environmental impact).
The pool manager – Brunel Pension Partnership – manages £38 billion of assets on behalf of 700,000 LGPS members and 2,000 employers, mainly across the West of England.
£250 million impact investment committment
The new commitment of more than £250 million of a £626m ($766 USD) new investment vehicle as impact money has been described as ‘market-leading thinking’ by an expert.
Brunel has selected Neuberger Berman to manage its third cycle private equity portfolio, which will operate under the name NB Clifton Private Equity III. The strategy will commit 40% to impact investments, while the remaining 60% will be invested according to Brunel’s Responsible Investment Policy
Jamie Broderick, deputy chair of the Impact Investing Institute in London, said: “As a pension pool, Brunel invests on behalf of its local authority pension fund clients, so this series (Brunel and Neuberger Berman have an ongoing relationship) of impact investments by Brunel reflects market-leading thinking, both at the pool and among the underlying pension funds.”
Inspiring pension funds to impact invest
He added: “One hopes that other pools and pension funds are taking inspiration from this illustration of the art of the possible in pension fund investment.”
Responding to Broderick’s comment, shared on LinkedIn, co-founder of the Good Economy, Mark Hepworth, said he wanted to know how much of the money would go into local economies in the UK. Hepworth leads the organisation’s place based impact investing network. This has been set up to drive more investment into the UK to help with “levelling up” (a term used by the UK government to talk about reducing economic imbalance between different areas and social groups).
Brunel Pension Partnership told Alliance that the investments are not targeted at any specific geographical areas.
Responsible investment and ESG
Commenting on how the funds would be used, in a statement, Jaime Alvarez – portfolio manager for private equity at Brunel – said: “Private equity offers a particular opportunity to fulfil our clients’ Responsible Investment ambitions, both through investing with managers that incorporate robust ESG (environmental, social and governance) processes, and through increasing our allocation to the rapidly-growing impact investing asset sub-class.
“We already know Neuberger Berman well and trust its ability to select investments that are not only financially sound but also impactful.”
Brunel Pension Partnership, based in Bristol, was established to pool pension investment assets on behalf of nine counties across the South West of England and also from Buckinghamshire, Oxfordshire and the Environment Agency . It’s owned by public sector organisations in the areas, with each having an equal share in the company.
The LPGS is one of the largest pension schemes in the UK, with over six million members. Brunel is one of eight organisations managing the funds.
The partnership between Brunel and Neuberger Berman dates back to 2019, when Brunel made a $60m commitment to the Neuberger Berman Private Equity Impact Fund on behalf of four LGPS clients. In 2021, it also awarded Neuberger Berman a £1.3bn climate transition-linked multi-asset credit mandate.
Claudia Cahalane is Investments Editor for Alliance