Admit it: social impact investing is done for the social impact

Editor's blog: There has been a flurry of stories this month on local authority pension funds allocating to investments that target a positive social or environmental impact, giving a shot in the arm for proponents of activist investment.

But at all points the pension funds involved have been careful to stress, as per their fiduciary duty, that the return drivers come before any starry-eyed bid to make the world a better place.

We reported on West Midlands Pension Fund setting aside £40m for small and medium-sized enterprises in the Birmingham area. 

“In terms of social impact, most immediate and important would be generating and hopefully sustaining employment in the West Midlands,” said Antony Ellis, communications officer at the fund, while stressing the investment is expected to hit the fund's target annual return of 6.9 per cent.

We then reported on Strathclyde Pension Fund making four allocations to renewable energy and drug development companies as part of its New Opportunities Portfolio, which has a preference for investments with a positive impact.

But pension schemes are taking on risks that they have not taken on previously, with managers of whom they often have no prior knowledge. 

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