Increasing our impact investments to £100 million in UK’s first

We are updating our impact investment strategy and increasing our allocation from £22 to £100 million by 2026, with a vision to incorporate impact into our entire investment portfolio in the future.  

Amounting to 10% of the value of our £1bn endowment today, this is the largest known impact investment allocation ever by a UK charitable endowment, a move that follows five years of building, and learning from, an initial portfolio that has delivered measurable impact with attractive returns.

To achieve our new target of £100 million, we are accelerating our fund commitments to around £25 million a year to funds focusing on health and its social determinants. These will include more global opportunities and high-priority emerging investments in sectors including food and nutrition, employment and training, and community infrastructure.

The updated strategy will also see us directing more capital from our endowment to catalytic investment opportunities. By investing in emerging yet potentially transformational ideas, we aim to pave the way for others to invest and help upscale the capacity to drive health impact.

We prioritise investments that either create, or show us how to create, better health outcomes for people

As an organisation with a mission to invest in a healthier society, and a mandate to use all our assets to achieve that, impact investment offers an unparalleled opportunity to deploy capital in ways that are strongly aligned with our goals – both for health impact and financial return.  

Since 2018, we’ve been on a mission to learn about impact investing and how to maximise it to deliver on our health impact and financial goals. We see it as a path towards eventually deploying all our capital in this way.  In that time, we have built a £22m multi-sector, multi-asset portfolio that has delivered measurable impact alongside attractive financial returns. We are confident that our model works and are now increasing the capital allocation.  

Although our home is the London boroughs of Lambeth and Southwark, our strategy is increasingly global. By accessing opportunities from around the world, we can learn about how systems and businesses in other similar areas help improve health and tackle health inequalities. 

We are attracted to investments and strategies that are bold enough to challenge systems and markets that are failing to meet the health needs of people, in particular those who belong to marginalised communities. We invest in pioneering ideas and business models that have the potential to scale. 

Our strategy for growth over the next five years includes increasing our catalytic investments 

Catalytic-oriented capital supports enterprises, fund managers, or markets that face barriers to access mainstream capital markets. This could be due to several factors including: the low incomes of the people they serve, or because they operate at limited scale, or face political or economic challenges. By investing in untested yet potentially transformational ideas, we aim to encourage others to invest and scale up our capacity to drive health impact. 

Deploying catalytic capital requires our investment approach to be more risk-tolerant, patient and flexible than traditional investing approaches. We aim for a competitive average return across our impact investments which supports our endowment’s financial objective of generating annual returns of at least inflation plus 4%, ensuring the future health of our endowment and our ability to support our current charitable goals. 

Using investments to back both tested and pioneering solutions is a powerful tool to create change

There is growing demand for investments to deliver more than just financial returns. In response to issues like climate change and public health, investors are increasingly stepping into the role of corporate citizenship.  

There is an estimated $5 to $7 trillion financing gap annually that is hindering society’s ability to achieve the SDGs by 2030. We believe that impact investing can help address this.  

Globally, the impact investing sector is worth $228 billion. Impact investments in the UK totalled £58bn in 2020 (Impact Investing Institute), and this figure is expected to reach £100bn in five years. Despite growth, impact investing today still accounts for less than 1% of total Assets Under Management in the UK.  

But there is a good evidence base to demonstrate that risk adjusted market rate return and impact co-exist. In addition, the amount of impact ‘products’ to select from is growing year on year. Institutional investors – including local government pension schemes – are now increasingly allocating to impact.

To tackle the social, economic and environmental factors vital to ensuring a healthier society, we need support from multiple actors. This includes government, the third sector, companies and investors of all kinds. 

We’re sharing what we learn on our impact investing journey to encourage investors, asset managers and others to explore impact-led investing.