The Law Commission has issued a call for evidence about the legal and regulatory barriers to the involvement of pension funds in social investment.
The call for evidence, which has been launched at the request of Rob Wilson, the Minister for Civil Society, will focus on how pension funds can be invested positively to achieve social good.
It will also consider how far the law allows, or should allow, pension funds to select investments because of a potential positive social impact.
The Law Commission is due to produce an account of the law in this area in May.
The call for evidence builds on a previous Law Commission report, Fiduciary Duties of Investment Intermediaries, which was released in 2014 and gives pension trustees guidance on when they can take ethical, environmental, social or governance issues into account.
That report focused on defined-benefit pension schemes, but the new call for evidence will look at defined-contribution pensions.
One of the ideas under consideration in the call for evidence is France’s system of solidarity investment funds: 10 per cent of funds in these pension schemes are used to make social investments in charities, cooperatives and social businesses, and the rest is focused on traditional socially responsible investments.
More than a million French people have signed up to the solidarity investment fund since it was launched in 2001, and Big Society Capital has previously called on the government to introduce this system in the UK, where it says a similar scheme could raise hundreds of millions of pounds for the charity sector.
Wilson said in a statement: "This is an important piece of work by the Law Commission, which should contribute to mainstreaming social investment through investment of capital by pension schemes. The right social impact investments can fit the return profile needed by pensions as well as delivering positive outcomes for society."
The deadline for responses to the call for evidence is 15 December.