July 3, 2024. Place-based impact investment is revolutionizing the way in which capital can address specific local challenges, promote sustainable development and strengthen communities. This strategy, which combines public and private resources, seeks to generate financial returns along with social and environmental benefits. In this article, we explore the Impact Investing Institute’s strategy, case studies in England and VIVA Idea’s perspectives on this innovative form of investment.

The United Kingdom is a developed country but has significant and increasingly evident regional inequalities, and in that context, place-based impact investment is seen as a promising strategy to address these challenges.

The Institute of Impact Investment in England has been at the forefront of promoting and expanding place-based impact investment, working with diverse stakeholders to encourage investments that not only generate financial returns, but also address social and environmental issues.

This approach, place-based impact investment, brings together public and private capital, capacity and skills to leverage investments that respond to the unique opportunities and challenges of each locality.

The growing acceptance of place-based impact investment and its implementation in different regions of the UK shows how this form of investment can promote inclusive and sustainable development.

In the case of the UK, the Institute has shown that the key is the land, the “place”, the appropriateness of the investment to the needs of that space. And it seeks to give those “places” a voice.

In the case of the global south, the contextualization would be totally different, as is evident from the different conditions of each locality.

In the recent report “Place-based Impact Investing: Emerging Impact and Insights” published by the Institute for Impact Investing, the Institute defines place-based impact investment as a strategy that combines public and private resources to respond to location-specific challenges and opportunities.

Two notable examples of place-based impact investment in action are projects in Wakefield and Southampton. In Wakefield, a former mining area, the place-based impact investment project has involved investors in urban regeneration, clean energy and small and medium enterprise (SME) growth initiatives.

This project has led to the exploration of partnerships with large construction companies to develop green skills and attract capital to small businesses through a Community Development Finance Institution (CDFI) based in West Yorkshire.

Separately, Southampton is exploring how a place-based impact investment approach can unlock investment to capitalize on key regeneration initiatives and enhance its creative and cultural sectors.

This effort builds on its 2025 UK City of Culture bid, seeking to maintain momentum and attract long-term investment that will promote growth and prosperity in the city and region.

Strategies to scale and spread.

The Impact Investing Institute has outlined a strategy to scale and spread land-based impact investing in the coming years, focusing on seven key areas.

One of the main ones is investor engagement, organizing events and meetings to foster understanding and engagement with place-based impact investment, such as the UK Real Estate Investment and Infrastructure Forum (UKREiiF) and other leading conferences. In addition, pilot projects, such as Southampton, will continue to develop cultural regeneration projects and explore new investment opportunities.

The Institute proposes the creation of a “coalition of places”, that is, a set of instances, initiatives or spaces in which impact investment beneficiaries can coordinate with each other and with investors, thereby enhancing the reach of these “places”. This coalition will play a crucial role in providing a forum for stakeholders to share knowledge and facilitate connections. It will also seek to engage and support more local authorities to adopt the place-based impact investment approach, building on the knowledge gained. Community engagement practices will also be promoted through the development of a community of practice to improve best practices.

Another key area is innovation in blended finance, where innovation labs will be set up to explore solutions to specific challenges in various sectors. Finally, the Institute will organize an annual conference on place-based impact investment to share learnings, deepen practices and attract new investors and venues interested in this form of investment.

Developing country perspective

From VIVA Idea’s perspective, place-based impact investment is crucial to achieving significant and sustainable impact in local communities. Shannon Music, Director of Operations and Strategic Partnerships at VIVA Idea, emphasized the importance of this approach: “Place-based impact investment is key to achieving significant impact, as it allows solutions to be contextualized to the needs and potential of each location, thus ensuring their effectiveness and long-term sustainability”.

In addition, Urs Jäger, Director of Research at VIVA Idea, stressed the need to adapt place-based impact investment experiences and approaches to each specific locality: “For place-based impact investment to be truly effective, it is essential to appropriate the experiences and approaches to each location, contextualizing strategies and building on the strengths and challenges of each community.”

Place-based impact investment represents a unique opportunity to address local challenges and promote sustainable and inclusive development. Through collaboration between the public and private sector, and through well-delineated strategies such as those proposed by the Impact Investing Institute, it is possible to transform communities and generate both social and financial benefits.

The experiences in Wakefield and Southampton demonstrate the potential of place-based impact investment to revitalize local economies, and with continued support and implementation of best practices, this approach can scale and spread widely, bringing prosperity and well-being to more regions.

VIVA Idea’s perspective reinforces the need to contextualize and tailor investment strategies, ensuring that each locality can maximize its potential and achieve lasting and meaningful impact.

VIVA Idea recently organized a workshop at the annual meeting of the international GSG Impact group, held in Costa Rica, on the insights of the more than 40 member organizations of the international group. Some of these reflections are summarized in this VIVA Idea article.

In that workshop, participants discussed the key points for an effective place-based impact investment strategy in developing countries. These points highlight the importance of stakeholder and community engagement, the use of rigorous methods to measure impact, and the implementation of standardized frameworks and metrics. They also emphasize the need to foster collaboration and transparency, establish effective networks, and recognize the unique challenges of each locality, proposing practical solutions to overcome obstacles and enhance the positive impact of investments.

Workshop facilitators Urs Jäger and Jose Valverde, members of VIVA Idea, also stressed the importance of a holistic and adaptive approach, ensuring that strategies are inclusive and sustainable in the long term. Active community participation and local capacity building are essential to the success of these projects, according to input from global leaders in impact investing.

It was also highlighted that it is crucial to align stakeholder roles and share best practices to create a robust impact investing ecosystem. These actions strengthen trust and commitment, enabling more effective and lasting development in local communities.

Impact investing, according to one of its main promoters, British investor and philanthropist Ronald Cohen, is a concrete alternative to the difficulties of measuring environmental, social and governance (ESG) compliance standards, since “ESG promises both impact and return, but does not measure impact accurately. The need for measurement is now more apparent than ever,” said Cohen.