Growth of Impact Investing In Australia - Report
2 April 2013 at 11:59 am
A Federal Government report suggests that the Impact Investment market in Australia is still in its early stages but shows great potential for growth.
The report Impact Australia – investment for social and economic benefit is written by Social Innovation Strategist Rosemary Addis from the Department of Education, Employment and Workplace Relations along with John McLeod and Alan Raine.
This report provides a foundation for understanding impact investing in the Australian context: what it is, why it matters, what is happening here and what could or should happen.
It says the distinguishing feature of impact investing is the intention to achieve both a positive social, cultural and/or environmental benefit and some measure of financial return.
The report says Australia has not yet seen a concerted focus on developing the field, yet foundations for increasing the scale and scope of impact investment are in place and international commentators visiting Australia have remarked on the signposts.
It says the potential extends beyond the domestic market, to what can be done from Australia, particularly in the Asian region.
“The imperative now is to translate interest into action, and fragmented activity into a more coherent practice for impact investing in the Australian context.”
Based on international data, the research suggests significant potential for growth in these sectors is up to 38 per cent annually
The report says impact investing helps investors by providing new opportunities to put their capital to use in ways that make a financial return and align with their values. It helps governments target their spending and encourages more capital into areas where there is need for new solutions. It also helps philanthropists generate greater impact through the combined effect of their investment and grant making activities.
“A powerful illustration of the need to do this is the Bill & Melinda Gates Foundation. It is the world’s largest foundation with around US$40 billion in capital. If that money was used to provide financial support to the world’s poor, without corruption or transaction costs, it could provide US$10 per person—or 5 days of support at US$2 per day—before completely exhausting its capital reserves.”
The report says there is representation in the impact investing field in Australia from across the range of possible investors: individuals; family offices; philanthropic foundations; corporations; banks; community finance intermediaries; institutional investors, including superannuation funds; and governments.
However it says, activity is limited to a small number of ‘first movers’ in each group.
“Examples show activity in a broad range of impact areas, from health and housing, early childhood, environmental sustainability and clean energy to more financing options at the right time for the cultural sector and social enterprise,” it said.
“There is also a spectrum of scale, from ‘micro’ or ‘crowdfunded’ investments through
web based platforms and relatively small investment in individual enterprises (for example, the STREAT equity raising was $300,000), through to transactions which are much larger (for example, the proposed Government Rental Affordability Index-Linked (GRAIL) Income Fund for affordable housing).”
So far, the report says, with a few notable exceptions, most Australian impact investment has been domestically focused.
“Local examples of international impact investing interests include Barefoot Power (Case 6, Section 2.2) and microfinance fund investments by Christian Super and The Grace Foundation. In addition, Australians are contributing impact loans through crowdfunding microfinance sites, like Good Return.”
David Knowles, Executive Director, Philanthropic Services, JBWere said:”This report is the first of its kind in Australia and demonstrates the potential for growth in this market is significant. We look forward to engaging with business, government, and the community to grow the impact investment market so investors have the opportunity to acquire investments that generate a financial return whilst making a contribution to the society they live in.”
The report can be downloaded at www.deewr.gov.au/impactaustralia