Australia: First to Mainstream Impact Investing?
5 November 2014 at 9:51 am
Australia could be one of the first countries in the world to mainstream impact investing through superannuation in a way no other country has the opportunity to, the Nexus Youth Summit in Melbourne has been told.
Andrew Tyndale, a Fulbright Professional Scholar and Founder of Grace Mutual Limited, a Not for Profit designing investment mechanisms to attract social sector funding, told the summit that the opportunity for superannuation-based impact investing in Australia was not mirrored almost anywhere else in the world except Europe, and stood in stark contrast to the United States.
“In Australia, we have this fantastic thing called portability, where your superannuation fund is portable on a couple of months notice. You can move to another superannuation provider,” Tynedale said.
“The superannuation funds here are extremely conservative, they’re going to hide behind fiduciary duties and their legal responsibilities…but the fact is, already they tailor investments to the desires of their members.
“In the US, the wealth management industry is enormous, and the people who manage the funds, who determine where they go, are so far removed from the people who own the assets – like you and I in our retirement fund, there’s no way you can bring any influence to bear, or pressure.”
Tynedale said Superfunds in Australia could apply a social lens in the way they were already applying an environmental lens.
“Many of them [superfunds], half of them probably, provide a green tick-a-box which says put a portion of my portfolio into a green, environmentally friendly portfolio. How hard is it for them to do a social bond?”
“We have this amazing opportunity on a retail basis, on a public basis, to start adding pressure, to start turning up pressure on the fund managers, to offer these social options that we can then move our funds towards.
“As soon as we start making it known that it’s our desire to have a social option, then that will create demand which send the message to intermediaries that they better come up with all these investments so super funds can invest in them.
“Superfunds love saying that they’re involved, but until intermediaries deliver the product, they can’t. And until people tell their fund managers to demand it, intermediaries won’t,” he said.
A 2013 report from the Entrepreneurship & Innovation Research Group at the University of Sydney Business School contended that the opportunity to align to members’ values could prove a lure to draw cautious Australian superannuation funds to the impact investment space.
Impact Investments: Perspectives for Australian Superannuation Funds said that superannuation funds “face an industry environment in which they are regarded as being out of touch with the communities in which their members live.”
“Impact investing allows asset managers to meet a growing demand from individual and institutional clients that investments should align with social and environmental values. Those willing to engage early and contribute to the building of the market can build an enviable competitive advantage,” the report said.
In Australia, the market potential for impact investment is estimated to be $32 billion over the next decade, with that figure globally in the range of US$400 billion to US$1 trillion.
A gender lens was the theme of this year’s Nexus Youth Summit, which brings together social entrepreneurs, young philanthropists and changemakers to tackle global social, economic and environmental issues.
The Nexus movement began in New York four years ago, with the inaugural Nexus Youth Summit held in Sydney last year.