Impact Investment Finances Indigenous Community Solar Project
1 June 2016 at 9:40 am
In what is believed to be an Australian first, an impact investment loan via two philanthropic foundations has seen a 139-panel solar power system installed at an Indigenous community in Western Australia.
The 36-kilowatt system at the Kurrawang Aboriginal Christian Community near Kalgoorlie is mounted on the roof of a workshop and machinery shed and is expected to displace 20 per cent of the community’s electricity use and offset about 60 tonnes of carbon dioxide each year.
The solar project is a joint initiative of the Not for Profit Alternative Technology Association (ATA) and the Kurrawang Community board, with a $52,500 investment loan by the McKinnon Family Foundation led by former funds manager John McKinnon and the CAGES Foundation – a private ancillary fund founded by Paul and Sandra Salteri in 2009.
Impact investment is capital used for projects to generate social or environmental outcomes as well as financial returns.
Impact investing is something that the director of the McKinnon Family Foundation John McKinnon is passionate about. He told Pro Bono Australia News he hoped that in future there would be community solar systems throughout outback Australia.
“This project is a fine example of what impact investment can achieve in supporting both community needs and renewable energy,” McKinnon said.
McKinnon said his foundation, which he set up with his wife Sue, had already successfully made a number of impact investments and this WA one was particularly attractive.
“The main theme for our foundation is funding climate change and renewable energy. Clearly this [project] ticked that box and the second thing that we like is that it is a remote community and I am very keen on community development,” he said.
“I want to help remote communities do things that lowers their costs and this brings a whole lot of benefits to these people. If they lower their electricity costs then they can do a whole lot of other things in their community. This one came from them. It’s not an outside imposition and the local community wanted this and we were able to work with them to make it happen. So I love the community development aspect as well as the climate change and renewable energy aspect.”
McKinnon said the loan was to be paid back over about six years with a return on investment of around 8 per cent.
“It’s quite a commercial deal. It’s not discounted in any way, it’s a commercial arrangement,” he said.
McKinnon said he was keen to use his foundation funds in more renewable energy projects.
“It just seems to make sense to us that you use your whole corpus to achieve social good. It doesn’t seem to make any sense to invest in mainstream assets that may well be doing bad to the world and try to give 5 per cent away to solve those problems,” he said, referring to the 5 per cent annual distribution required of private ancillary funds.
“We should be using everything within our means to do good in the world.
“Renewable energy has been a very difficult area to try to find impact investments in because of the political environment… we have invested in a few places. In NSW there is a project called ClearSky and we have invested in their funds… fairly small funds.
“Just coming into the market now is the bigger solar fund by Lighthouse Infrastructure and the Impact Investing Group (IIG) is coming out with one soon. We will have a look at both of those products which are larger scale solar deals… and I’m working on a deal in Papua New Guinea that may or may not happen and that will be around putting solar panels and batteries into a school over there.
“It’s something we feel pretty passionate about.”
McKinnon spent 17 years in the finance industry.
“The last ten of those I was a co-founder and part owner of a funds management business so I sold out of that in 2005 and it was the proceeds of that sale that went to form our family foundation. It’s a fairly new foundation… we have a major focus on environment, particularly climate change and also international development and justice for asylum seekers are the main themes that we pursue.
ATA’s chief executive Donna Luckman said the WA solar system project was a great achievement for the 120 people of Kurrawang and a win for the environment.
“Since all the buildings in the community are metered as a single entity, every household will benefit,” Luckman said.
“It means the community will save on their electricity bills and the environment benefits as well through reduced emissions. This really shows how you can be innovative with community renewable energy and impact investment.
“We hope this can serve as a model for other communities.”
Kylie Charlton, chief investment officer of Australian Impact Investments, who advised CAGES Foundation on their participation in the loan, said they were excited at the potential for replication with other remote communities and the long-term potential to establish a fund of diverse community solar assets.
“We hope that this project is the first of many community solar projects in which investors can participate,” Charlton said.