Moving Impact Investment into the Next Phase

Impact investing is being primed for growth with the launch of a new forum designed to support the development of the market in Australia and New Zealand.

The Impact Investment Forum was launched on Thursday by the peak industry body, the Responsible Investment Association Australasia (RIAA), in a bid to provide a dedicated hub to connect and deepen the participation of organisations and individuals in what is a growing field.

The forum will focus on growing awareness and knowledge of impact investing, building the capacity of advisers and practitioners, broadening networks, and influencing policy in the interests of building a strong impact investment market in the region.

RIAA CEO Simon O’Connor told Pro Bono News it was an exciting move.

“Impact investment is a strong emerging theme and one that has really moved from just the interest of private wealth clients and philanthropists, through to now being a focus for very large institutional investors in Australia,” O’Connor said.

“I think that we are at a point where we have the potential to really scale up how we put capital to work to drive strong social and environmental outcomes… [and] really start moving impact into its next phase.”

He said there was a lot of interest in impact investing, which seeks to achieve measurable social or environmental impact alongside financial returns.

“We’ve got quite a big membership of around 170 investment organisations really across the board from advisors through to superannuation funds, and across all of those categories I’m constantly amazed how much interest there is in impact investment,” he said.

“I think there is a real desire from many investors out there.

“And I think there is an understanding that citizens of Australia actually really love the idea of their retirement savings and their investments being put to work to drive, not only strong financial outcomes, but strong social and environmental outcomes and so this really has the potential to be something of a strong win win for Australians and the investment market.”

The forum aims to build on the foundational work of the Australian Advisory Board on Impact Investing and Impact Investing Australia to catalyse the market for impact investing.

It will receive assets Impact Investing Australia has incubated, including the Impact Investor Survey and Benchmarking Report on impact investment activity and performance.

O’Connor said it aimed to move the pieces forward to develop market based data and practice.

“RIAA’s mission is to see more capital being invested more responsibly. Through the Impact Investment Forum, we want to develop and amplify the significant work done by Impact Investing Australia, and help take impact investing to scale,” he said.

“Together with our other 150 members, we will bringing the voices of 20 superannuation funds to the table. Alone, these super funds manage $500 billion of Australians’ and New Zealanders’ retirement savings, and have huge potential to deliver large-scale solutions to pressing social and environmental challenges.”

Australian Advisory Board chair Rosemary Addis said the market had made significant leaps in the last few years.

“Since we launched the Australian Advisory Board on Impact Investing’s strategy to catalyse impact investing in and from Australia in 2014, the market has made significant leaps in increased awareness, interest and activity,” Addis said.  

Globally, impact investing is estimated to reach between US$600 billion (A$800 billion) and US$1 trillion (A$1.3 trillion) within a decade.

O’Connor said in Australia and New Zealand, surveys have shown the market is in the nascent stages of development but with strong potential, estimated to reach $32 billion in Australia by 2022.

“The pace that this is moving now really sees that as a realistic outcome in terms of the amount of capital,” he said.

“I think what we’ve started to see over the last couple of years is much more numerous structures and investment options and products coming to market that appeal to a much broader range of investors, from very small investors to social enterprises through to smaller or medium sized social impact bonds, all the way through to hundreds of millions of dollars worth of green bonds and gender equity bonds that we’ve seen come out of NAB recently and governments in Queensland and Victoria have launched green bonds recently.

“And so I think as these options come through and as more products come to market it actually enables something of a snowballing effect, so we are really going to be focused on ensuring that the market matures in a way that is really credible and we’ll be really helping to articulate what is quality around impact investing.”

The forum will be led by impact investing leaders, with Peter Murphy (former CEO of Christian Super) as its chair, along with co-deputy chairs Kylie Charlton (Australian Impact Investments and Unitus Capital) and Amanda Goodman (Impact Investment Group).

In addition to its partnership with Impact Investing Australia, the forum is partnering with other organisations and communities with a commitment to catalysing more private capital for positive social outcomes including Philanthropy Australia, B Lab Australia and New Zealand, and the Impact Investment Summit Asia Pacific.

Philanthropy Australia CEO Sarah Davies said they would be working together to continue to progress the development of the impact investment market.

“Philanthropy Australia and RIAA share a vision and appetite for the potential of impact investing in Australia and how it might accelerate positive social, community and environmental change,” Davies said.

One of the forum’s first activities will be to lead an investor field trip focused so members can see the kinds of projects being funded through impact investing.

O’Connor said impact investing was a useful tool for attracting capital to many different assets.

“I think what is really critical here is establishing from the outset what are the measurable  environmental and social impacts that we are trying to achieve through those investments and then being really clear that we are delivering something additional to just a standard investment vehicle, and that is why it really helps to define impact,” he said.

“I think there is great potential across a lot of different aspects, projects and themes and so I don’t feel that at this stage we are limited by that very much.”

He said fundamentally the objective was to feed more capital into sustainable assets and enterprises.

“I think impact investing has emerged as a really great vehicle for connecting capital with projects and companies that not only deliver really good financial returns but measurable social returns and so that is really exciting,” he said.

“The second piece to that is increasingly Australians are starting to ask more and more questions about how their retirement savings are being invested, how their superannuation is being invested and as a result we have a lot of the superannuation industry starting to consider much more broadly what is actually the impact of the portfolio investments we’re invested in on behalf of our members, the Australian public.

“I think there is a big conversation there to be had to recognise that every investment decision has an impact, and so it is really important that we start considering what we’re funding with the investments of our retirement savings and our superannuation funds.”