Australia’s Impact Investment Potential Strong - Report
Wednesday, 17th September 2014 at 3:51 pm
There is clear potential for a vibrant, dynamic, and informed impact investment market in Australia with the possibility of A$10 billion in impact assets under management within the next five years, a new report reveals.
The report – Delivering on Impact: The Australian Advisory Board Breakthrough Strategy to Catalyse Impact Investing – maps a strategy to tackle some of the country’s most pressing social issues through impact investing and is part of the global report by the Social Impact Investment Taskforce.
The report says one area of potential growth is developing community amenities through social infrastructure: that is, financing for schools, hospitals, aged care, and housing, that better meets the needs of communities and those using and working in the facilities, as well as providing investment potential.
“In some cases, public-private partnerships have been extended to these projects and there is willing capital in Australia,” the report said.
“There is significant potential to further unlock capital and improve outcomes and alternatives for service provision where interested parties can come together on appropriate terms.
“This is not simply about contractual relationships or privatisation of public services. It is part of a broader shift in how we meet the needs of citizens and communities.
“Progress has already been made in the realignment from aid to investment in international development programs, especially in countries to which Australia often looks to benchmark its progress, such as the UK and US.”
The Australian report follows the release of the Social Impact Investment Taskforce report (established in 2013 under the UK’s chairmanship of the G8) called Impact Investment: The Invisible Heart of Markets.
This global report calls on Governments and the financial sector to take action to unleash US$1 trillion of private sector impact investment to tackle entrenched social problems.
The report highlights the potential that impact investment has to help solve some of society’s most pressing issues, such as caring for children and the elderly, community regeneration, financial inclusion, housing and prisoner reoffending.
It lays out several recommendations, devised by Government and private sector experts from across the G7, EU and Australia.
Key recommendations include:
- Removing existing constraints on the growth of impact-driven organisations, and providing better recognition, tools and support to those seeking to deliver social impact at scale.
- Removing of barriers to the flow of capital into impact investment, particularly from foundations and pension funds.
- Incorporating the measurement of social and environmental impact into the performance reporting of governments, business and charities. This requires a paradigm shift in capital market thinking, from its current two-dimensions of ‘risk’ and ‘return’, to incorporate a third, ‘impact’.
- Unlocking the potential for impact investment to help deliver better social outcomes and economic growth in developing countries, by incorporating it in their domestic policies and by giving it growing prominence in international aid and foreign investment.
- Greater leadership from across society – including businesses, foundation, community organisations, impact entrepreneurs, investors, governments, global organisations as well as individual citizens – to catalyse a dynamic global social impact investments movement. Government leadership is particularly critical to remove barriers, build capacity, catalyse investment activity and harness the power of the market to address critical public policy challenges.
“This is not about increasing or reducing public expenditure, but helping government to benefit from innovation and private sector capital in order to achieve more impact with the money it has” UK Chair of the Social Impact Investing Taskforce, Sir Ronald Cohen said.
“In driving the achievement of impact, social impact investment harnesses the forces of entrepreneurship and capital and the power of markets to do good. It brings the invisible heart of markets to guide their invisible hand.”
Australia is one of eight countries participating in the G8, in addition to the EU. Impact Investing Australia co-founder Rosemary Addis is Australia’s representative on the Taskforce.
To coincide with the UK Taskforce report launch, each country participating in the Taskforce has published its own report outlining what is needed in the various domestic contexts to accelerate and deliver the market for impact investing.
Impact investing is a growing field of investment that intentionally creates positive social impact as well as a financial return, and measures both.
“Australia is at the vanguard of efforts to catalyse a global market for investments that have the potential to create real benefits for society,” Rosemary Addis, Australia’s representative on the Taskforce and Chair of the Australian Advisory Board and Impact Investing Australia, said.
“This is not a simple redirection of responsibilities and capital. It is an opportunity to transform our approach to social issues, and open up new avenues for innovation that grow economic as well as social value.
“The Australian Strategy focuses on delivery through leadership,policy and action. Working groups are already being brought together to progress initiatives, including a $350 million social investment fund.”
“I have high expectations for Australia with this strategy. It is staking its position as one of the leaders in the impact investment space,” Sir Ronald Cohen said.
Peter Shergold AC, Chancellor of the University of Western Sydney and member of the Australian Advisory Board, said: “This strategy is a clarion call across all sectors – we need to collaborate and innovate to achieve better outcomes for society.”
Download the Australian report here.