David Epstein If lots of people could fund this maybe it's not the right place for us to put our money, because we have this broad mandate which can do the more difficult things and we almost feel like we have a responsibility to focus on that rather than just doing the same thing as everyone else.
Jane Goodland Hello and a very warm welcome to the LSEG Sustainable Growth Podcast, where we talk to leading experts about sustainability, business and finance. I'm your host, Jane Goodland, and this week I'm joined by David Epstein, who is the managing director of Aviva Capital Partners. Now we're going to be exploring how long-term private capital can be used to both solve long-term real-world challenges while also delivering attractive financial returns.
Jane Goodland Thank you so much for joining us today. I can't wait to talk to you because I think Aviva Capital Partners is a really, really interesting organisation. So we will talk about that, but first I kind of want to get up close and personal and find out a bit more about you if that's okay. So you've been Aviva for what, like 15 years or so? But how did you get there? What did you do in your earlier career? Tell me all about it.
David Epstein Thanks, Jane. And look, great to be here today. So I should start by saying I used to be a mathematician. That was my starting point. So I did a PhD in Maths Finance back before that was a fashionable thing to do. And then I did some really, really technical work in banking for a few years, kind of calculating the prices of lots of derivatives and all that kind of stuff. But what I found quite quickly was it was interesting to take that technical knowledge and use it really to solve problems. And so I moved into kind of the solutions type of space, and I spent about 10 years in banking, advising corporates and then financial institutions, so places like Aviva and sovereigns as well, on how to kind of manage their financial risks. And then an opportunity arose in Aviva to kind to jump on board and do it from the inside, which I thought was really interesting. So I started off doing kind of similar work here, and then kind of gradually just expanded role and did more and more interesting things. So I spent a lot of time thinking about how we invest, how we allocate capital across the whole business. And as you all know, Aviva is a really big UK insurance company. So it's a kind of a composite business. It has general insurance, like house insurance and car insurance, but it also has all the life insurance products and protection products as well. And they all have different sort of investment strategies you need. And then we're in lots of different countries as well, so trying to bring all that together and think about how does that work in aggregate. And I moved from there, I was then Group Treasurer for about five years. And that was kind of managing the group centre’s balance sheet and ensuring we have the liquidity ready at hand to support all of those businesses and really the kind of Aviva Capital Partners role was bringing the two things together so it was thinking about how do we use some of that group money that we kind of have sitting there in the centre which is arguably just kind of sitting in like the equivalent of your current account and use a bit of it to try and earn some sort of return but actually to have some impact as well. So, kind of pulling back to that kind of how do we allocate all that capital across Aviva? How do we find interesting projects to invest in and think about how do we generate those in a new business? And so that was kind of where Aviva Capital Partners came from.
Jane Goodlan Excellent, that was set up in 2022, is that right?
David Epstein Yeah, so it started in 2022 and I was on the board while still being treasurer as we started that business and then I took over as Managing Director of ACP in the start of 2025, so the start of last year, after we'd had that kind of original startup phase, got a couple of deals on the board, but we're really trying to work out how do we make this institutionally a part of Aviva and how we kind of take it forwards as a kind of focused business.
Jane Goodland So it's a really interesting model. Is this typical for organisations like yours to have this kind of private capital investment business?
David Epstein I think it's a little bit unusual and the reason it's unusual is it's currently, at the moment it sits outside of our kind of traditional regulated asset manager, which is Aviva Investors. Overall Aviva has invested a £100 billion pounds in the UK and manages kind of three, four hundred billion in total, but that's a regulated business with lots of customers where there's kind of, you have very strict mandates on how you invest your money and what it's for. And I think what we wanted to do was something a bit more startup in nature, where we could say, look, I do want to invest responsibly and for an appropriate, what we call a fair reward, but what I'm trying to do is achieve more than that. So it's not just about investment return. It's about how do I do something that's really aligned with what I care about as a company? And so Aviva has what we call the Aviva sustainability ambition, which is all about kind of social action, climate action, and how we kind of, how we change things for the better for ourselves as a company, but for the you know the country at large and the world. And what we wanted to do was to say, how can we actually use just a little bit of the money that we have to kind of really target that sort of impact. And what was thought was, well, we have be really early stage. So Aviva invests a lot of money in the UK. So we have maybe the order of £35 billion kind of real assets. So things like infrastructure, schools, hospitals and the like, but they're all built projects. And the early stage, when you're kind of going from, well, I've just got some ground that needs something on it to, I actually have a built project, is really hard and complex and quite risky and something that institutions have found really difficult to engage with. But we thought, if we can actually target that specifically, then what we can do is try and mitigate those risks by really focusing on them, but then create those long-term assets that Aviva's really interested in, because it wants to have those real assets that it can hold for 30, 40, 50 years, that generate those kind of stable cash flows, which are exactly the sort of thing our customers want in their pension portfolios in which we use to back annuity products that we sell in the business.
Jane Goodland So David, when we're thinking about Aviva Capital Partners, you're investing your balance sheet capital. What does that mean in terms of your approach relative to others? Does that allow you to be differentiated from other more traditional investment houses? What's the difference or the advantage of what you're doing?
David Epstein Yeah, so because we're investing our own money and no one else is, we can have a really kind of broad and flexible mandate, and because we take each individual deal up through kind of Aviva management to kind of decide whether it's the right thing to do. So it means we can look at all sorts of things that might fall outside of a traditional kind of asset management mandate, where you have to be quite specific about what you're trying to achieve and the returns you're tying to target and the like. And it means we can really think about early stages of projects which are much more complicated and tend to fall outside of those traditional boundaries and think about what a place needs and how we might be able to work in partnership with kind of sort of public-private partnerships you know with the local authorities, with mayors if it's kind of a mayoral area, in order to be able kind of say well this is something that we could do, but we can do it together potentially and here's how we can get involved as a financial institution to support you in that endeavour.
Jane Goodland So with that in mind then, if I was to say to you, what's the investment philosophy that over arches everything you do?
David Epstein We worked really to think about what the focus should be for the business and in order that we can kind of focus on that, those specific things. So those are, we want to earn a fair reward for the risks that we're taking. But I say fair really specifically because what we don't do is target the kind of the highest risk returns that we can get. What we do is say, overall I'm targeting a kind of return threshold and I need to make that across my portfolio, but sometimes I'll take a bit more or sometimes less. And sometimes the impacts outside of return will be greater and I'll want to do it even if it's a slightly lower return. So we want a fair reward. We want to be really aligned with our own sustainability ambitions as Aviva, so that's really focusing on the social and climate impact. We want create these long-term assets that Aviva is likely to want to hold for the long term. So we do the early stage of the projects, deliver those assets, and then they feed into the main business and become investments for the business.
Jane Goodland And so what's long term in just, you know, because long term means different things for different people. For ACP, what's long term?
David Epstein So when Aviva thinks about long-term investment, it's talking 30, 40, 50 years, so the life of the asset.
Jane Goodland Yeah.
David Epstein Really long term. Yeah, I think it's, I agree with you, you definitely see a lot of stuff that comes from financial institutions, where they talk about 'long term', and they're thinking one, two, three years. But I mean, our investments, we think we're early stage, and we're still doing things that might take 5 or 10 years.
Jane Goodland Yes.
David Epstein So that gives you an idea of kind of, this is really patient capital. And we're thinking about how can we make that work for ourselves, but also for the country at large.
Jane Goodland Yeah, it's really exciting. So again, just getting into that a little bit more in granular detail. It obviously requires quite a lot of upfront analysis and evaluation about what the right type of investments are. Talk me through the different lenses that you would assess an investment opportunity around, you know, in terms of trade-offs between impact, financial return, risk, resilience, you know, what's the evaluation process that you go through and how do you weigh up all those things to work out, yes, this is the right thing for us?
David Epstein Yeah, that's a great question. And it's something I think over time is becoming less qualitative and more quantitative for us, but it's hard to do because for us it's a real balance and it started off as more of a narrative. What is it I'm actually going to achieve in this place? And so I should say, you know, we have three themes we invest in, two of them are real estate, so it's urban regeneration and housing supplies, so building homes across the country. And then the third is sustainable infrastructure. So in the first two, we're kind of weighing up that risk reward with social impact. And in the third, it's kind of weighing it up with climate impact. And we're really thinking about those things in a way where if there's a really great social impact in a project, then we are going to potentially take that forwards, even if there are lots of other projects out there with a better reward for us. Because what we're thinking about is how can we make a difference? And especially, how can we make something happen that otherwise wouldn't without us? We see a lot of projects and a lot of people bring us into things and say, would you be interested in funding this? And we look at it and there are 17 other people also talking to them. And if you think, well, if lots of people could fund this, maybe it's not the right place for us to put our money, because we have this broad mandate, which can do the more difficult things and we almost feel like we have a responsibility to focus on that rather than just doing the same thing as everyone else.
Jane Goodland I think this might come to life even more when we kind of get into some of the case studies and I wanted to ask you about one in particular which I think is truly fascinating and certainly resonated with me personally because it's the London Cancer Hub that you have helped to kind of create and develop and it's interesting to me personally because actually it's at the Royal Marsden Hospital I believe and I just recently have finished a fundraising walk for the Royal Marsden where I kind of walked or hobbled a marathon and for that cause and it is something that is incredibly personal and important to me certainly but I'd love to hear more about what you're doing with the Marsden at the London Cancer Hub.
David Epstein Thanks, Jane. And that's a long walk.
Jane Goodland It was a very long walk. I had many blisters.
David Epstein So, look, I think the London Cancer Hub is an amazing place, right? Even before we get involved, it's been going for a while, and, you know, it is the main base for the Institute for Cancer Research, a huge charity that does loads and loads of groundbreaking cancer research, and the Royal Marsden. And between them, they have come up with all sorts of groundbreaking solutions, medicines, drugs, and the like, and can do everything from kind of what we call bench to bedside, so they can invent something and then take it through to patients, because they have all of that on-site already. And they do amazing work. There are real ambitions to do more there and there happens to be a lot of land on-site, so Sutton Council who own that land are leasing it to Aviva to build private research labs alongside the ICR and Royal Marsden. The thesis is, if we can bring in loads of private research alongside, we can do even more and get even more groundbreaking research and become kind of top one or two in the world in terms of the kind of research that's being done. And so that's the ambition. So our plans are to build kind of the order of 850,000 square foot of new research labs alongside the existing ICR and Royal Marsden buildings. Also to build some key work accommodation about 120 homes, probably for the Royal Marsden. But also beyond all of that, to really kind of place make the whole place. So if you've been there, at the moment it's kind of, it's a bit of an isolated, if you work in the ICR, the Institute for Cancer Research, then you go to their buildings and they've got a cafeteria there and there's not much else for you to do around it. But if you're a patient going to Royal Marsden, you go there, you go and get your treatment and then you come home again. And what there isn't is loads of amenities on site, there's not lots of places to be when you're not actually working or receiving treatment, but you just want to be in the area. There's a really great STEM school nearby. There's Maggie's just there, which is fantastic and does some great work with patients there. But beyond that, there's not very much. And so what we're doing is working in partnership with all of these organisations to create not just the new bit that we're building, but actually make the whole thing a really cohesive place that people will want to live and work. And that's a huge kind of 10, 15-year project, multi-phase to build it out, but super exciting. And I think for us, it's an urban regeneration project, because it is about changing the place that there it is into something new and greater, but also the opportunity to work with these amazing organisations isn't one that you can get anywhere else in the UK.
Jane Goodland And that's live now, is it?
David Epstein So yeah, so it is still early stage. We've almost got just about a cleared site. We're doing enabling works on that to see what we've got. Planning has been received for the first phases. We have a building already there called the Innovation Gateway, which has tenants in it, about I think six tenants in, who are actively doing research and working closely with the ICR and the Royal Marsden. In terms of the build that's that will start to come online soon and then you know those buildings will take two, three four years to deliver. So it's about getting the momentum, getting people interested in coming to the site and wanting to work there and building that collaboration with kind of the ICR and the Royal Marsden. And if we can do all this together, we can be more than the sum of the parts.
Jane Goodland I wanted to also explore with you another case study which you guys have been involved in and that's really about the sustainable transport example because I know that this is something that cities around the world are thinking about, about how to get transport systems that really do work and marry with the infrastructure they have and the infrastructure that they want to build in the future. Tell me a bit more about the, is it the Rock Road project which is about bus, electric bus fleets right?
David Epstein Yeah, so I love this project because it's a really practical example of getting something done in climate transition, right? Aviva is really passionate about supporting the transition to net zero, but doing that in practise is really tricky and difficult. And I think this has been a really practical example of how we can actually just get something done. So if an operator wants to kind of switch to electric buses, then they can do that, but it's expensive. Electric buses are significantly more expensive than diesel buses. And if you want to switch a whole route or a couple of routes, you're probably looking at buying kind of maybe 50 buses to do that. And a bus is maybe £400,000. So that's a significant investment. To make that kind of investment out of your own capital is a big commitment for an operator. So there is a definite need for financing support for operators who want to make the transition. And I think we call it Rock Road because we're in partnership with an organisation called Rock Rail who do a lot of things on the railways. What we've done is create essentially a bridge to institutional finance because this can be a long-term financing product, but for Aviva to be interested in doing that with its kind of long-term asset investment strategy, it wants to be doing that in kind of institutional size, which might be kind of typically £100, £200 million sort of ticket. But an individual operator probably only wants to borrow £10 or £20 million in a single deal. And so what you need is something to sit in the middle and say, well, I'll aggregate up the individual operator leases and then I'll create an overall hopper of these that I can then go and get refinanced. And so, what we found was when we looked at this, that didn't exist and the institutional capital wasn't ready to kind of come in and do this in what was a new space at the kind of size that was available to it. So there was an opportunity to say, well, I'll sit in the middle and I can make that happen. I think it's one of those cases where for us it makes a difference. It gets things on the ground. There are buses in, and I think East London going around right now that we've financed. And, but actually success for us is maybe becoming obsolete and not being needed to be doing that any longer because we get refinanced out and then we can move on and do something else.
Jane Goodland You mentioned about success. I'm curious to know how you measure success, because ordinarily, if you speak to an investor, they've got a very clear view about what success looks like, whether that's relative to market returns or whatever in terms of kind of expected investment returns. But how do you measure success? Because I think you're sort of targeting something a little bit different, aren't you?
David Epstein Yeah, so obviously we do all the traditional stuff, right? We obviously are measuring returns, and it's important to keep those honest and make sure that the portfolio is being managed well and that we're mitigating risks and the like. And being an insurance company, we're all about risk management and thinking about that. But beyond that, there's a lot of kind of social metrics that we start to think about. How many jobs are we creating? How many homes are we building? Those kind of things. But I take it further than that, and I'd say really long-term success for us will be being able to go back to a place that we've been part of regenerating and be able to walk around it and just see it's a completely different place than it was. So often we look at places that are a bit stuck you know maybe private investment on its own hasn't been able to make that work, but we come in and together in partnership potentially with kind of the public sector as well, we can unlock places and change them and that's going to take 5, 10, 15 years but I think we all sit there in the team and dream about coming back afterwards and saying I was part of this and this amazing place we have now, whether that's the London Cancer Hub or any of the other places we work in, for it to be finished and complete and say, wow, this is amazing and this is what we really wanted to happen.
Jane Goodland I think before I let you go David, I want to know what's on the horizon. So what have you got coming up? What should we be watching out for? What's exciting you?
David Epstein Yeah, so I think what's really exciting at the moment is we've started working much more closely on a place-based approach with local councils, with some of the public financial institutions like National Housing Bank, Scottish National Investment Bank, to really try and make a difference in places that maybe need unlocking. So there's a couple of examples from the last year that we've already announced. In Southampton where there was a Toys "R" Us that was kind of someone had tried to make work as a regeneration site but hadn't been able to, but we together with the council and university are turning that into a new innovation centre. And then another one, the 1960s shopping centre that's been derelict for a very long time in Norwich and working with the council there and Homes England, that's going to become over a thousand homes. And I think they're really interesting cases because what we're finding is it's that public-private partnership that allows us to make the difference, But we're doing it in a way where we're kind of sharing in that kind of risk-return with the public sector in a way which kind of I think is very fair and means that if there is upside then we all benefit from it, which is a great model to be adapting and what we're finding is that those are now great examples of how it can work that we're taking elsewhere in the UK and finding there's lots of excitement about what we can do in lots of places where maybe there's something we can make a real difference to a place in bigger and bigger ways.
Jane Goodland Super interesting. We'll keep our eyes peeled for those. So David, it just remains for me to say thank you so much for taking the time out of your very busy schedule, I'm sure, to come and talk to us on the show. You've taught us loads and I think it's a super exciting model. And I will continue to watch what you guys do. So all the best, thank you so, much for giving us your time today.
David Epstein It's been a pleasure. Thank you, Jane.
Jane Goodland Well, I hope you enjoyed that conversation with David from Aviva Capital Partners. And if you did, don't forget to rate us and follow us on Spotify, Apple Podcasts, or YouTube, or any other platform you use. And if you want to get in touch with the show with any questions or comments, please email us at
[email protected]. That's all from me, see you again very soon.
