Delivering Government missions using impact-led venture capital and private equity
The UK Government has set ambitious plans for five key missions: economic growth, National Health Service (NHS) improvement, clean energy, safer streets, and breaking down barriers. To address these deep-rooted social and economic issues, innovative approaches and private capital are vital. The UK’s position as a Centre of Excellence in impact investing presents a unique opportunity to achieve the Government missions.
Impact investors are actively contributing to the Government missions. Impact investment intends to create measurable social and/or environmental impact alongside financial returns. This approach is helping deliver real improvements to people and the planet. The impact investing field is led by venture capital (VC) and private equity (PE) firms. Family offices, local government pension funds, and other institutional investors are increasingly joining in. The UK has emerged as a global leader in this space, establishing itself as a hub for both impact investing and sustainable finance. The UK can leverage this position to mobilise private investment towards government goals, and if done successfully, highlight this expertise globally.
The UK impact investing market currently sits at £76.8bn, representing less than 1% of the entire UK investment management market. We are witnessing significant momentum in impact capital from investors and Government. The Government has:
- shown openness to business partnerships;
- provided additional funding to the National Wealth Fund (NWF) and built its scope as the UK’s ‘impact investor’; and
- plans to develop a new social investment vehicle this year.
To capitalise on this momentum we have made commendations for policymakers and investors which cover capacity building, deal-flow and embedding social impact, including to:
- Upskill investors in place-based impact investing
- Align R&D funding with NHS priority areas to drive innovation.
- Incentivise early-stage investment in high-impact businesses.
- Clarify investment pathways with a Net Zero and climate adaptation strategy.
- Embed social impact into business and climate investment decisions.
