Out of the shadows: A turning point for social and environmental change
31 March 2020 at 6:00 pm
What if 2020 was not only remembered for the bushfires and coronavirus, but for positive change and a widespread recognition that our decisions about money have consequences beyond finance, writes Sally McCutchan, CEO and executive director of Impact Investing Australia.
Unprecedented heatwaves and devastating bushfires marked the start of a new decade in Australia that put climate change firmly on the agenda. This together with a global health emergency in coronavirus has seen environmental and health issues now transcend political and geographic borders including oceans.
Now more than ever Australians are looking to our leaders to make the changes needed to deliver positive outcomes in these uncertain times.
What if the year 2020 was not remembered only for the devastating bushfires and coronavirus. What if it was also a turning point when Australians stopped and questioned how we operate. When all of us asked whether it makes sense to be making money with the right hand of the economy and fixing the social and environmental fallout with the left. The moment when our governments and capital system moved to work hand in hand to better serve our communities and the environment we rely on.
It is hard to come out of this summer with any doubt that now is the time to make this change happen.
“We must create a future where social and environmental impact is integrated into decision making.”
It starts with our responsibility and the opportunity to mobilise more private capital for public good. We need to accelerate our progress towards a future where money flows to projects and businesses that drive both a positive impact and a financial return.
We must create a future where social and environmental impact is integrated into decision making and measured alongside other more traditional performance measures. All of us can catalyse this change through our decisions around our investments, purchases and consumption.
Partnership and collaboration are integral for this change and we need more of this. Governments, businesses, investors, philanthropists, the community sector and the beneficiaries themselves all bring important and differing skill sets and insights in making this change a reality. Their support is needed for the growth of sustainable businesses, activities and investments which generate positive, measurable social and/or environmental impact or at the very least avoid harm. In time this must become the new norm.
The year 2020 should see an acceleration of capital flowing to promising impact investments; with social entrepreneurs delivering strong social and financial returns able to access more and cheaper mainstream capital, upscaling and making a real difference to the lives of Australians.
Let’s be clear though, impact investments are not a panacea to solving all social and environmental issues. They do not absolve governments, philanthropists, businesses or individuals of their responsibility to act. They do, however, provide new and additional solutions by bringing together knowledge and skills from across sectors, applied in new ways.
Big Society Capital (BSC) in the UK demonstrates what can be achieved when government acts as a first mover and invests to enable a new impact focused market. Since its inception in 2012, BSC has invested in 44 intermediaries who have gone on to invest in over 800 social enterprises. BSC has unlocked £2 billion (A$4 billion) in funding in the UK impact investing market which has enabled these social enterprises to scale and grow their impact.
Bridges’ Sustainable Growth Fund demonstrates what can be achieved when investors back impact alongside financial return. This fund, established in 2002, invests in ambitious growth and often innovative businesses that are helping to tackle some of the UK’s biggest challenges in areas including healthcare, education and the environment. In 2013, the fund won best British private equity exit for the partial sale of its stake in the Gym Group at 3.7x generating an internal rate of return (IRR) of 50 per cent. This proves that great social and financial returns are possible.
Australia has its own success stories in social innovation and entrepreneurship. There are an estimated 20,000 social enterprises in Australia. Hireup and Knoxbrooke are two great examples that are looking to scale and have sought support from our Impact Investment Ready Growth Grant.
Hireup was built off the back of the NDIS. It seeks to revolutionise the way people with disability find, hire and manage support workers by harnessing technology and connecting people with shared interests. Still a relatively young social enterprise, Hireup has navigated the path to scale and grow. Since its inception it has provided 4.1 million hours of service to people with disability and now employs 200-plus staff.
“There is no doubt that 2020 will be a year we all remember. My hope is this is not just for the challenges.”
Knoxbrooke, through its disability services organisation Yarra View Nursery, provides employment to people with intellectual disabilities. It has won contracts to supply plants for several government projects including Mernda Rail Project; Western Program Alliance; Southern Program Alliance and North East Program Alliance. The nursery now employs 115 people, 86 who are living with disability, and generates over 120,000 hours of paid employment and over 7,000 hours of accredited training each year.
In May 2019, the Australian government announced a Social Impact Investing Taskforce and I am a member of its expert panel. In late January, we released our interim report which included initial findings from over 95 interviews and convenings with the sector. The report identifies the need for early stage funding to support innovative social entrepreneurs and flags an investigation of the potential to establish an Australian impact investing wholesaler akin to BSC.
Impact Investing Australia has called for the establishment of such an impact investment wholesaler, Impact Capital Australia for the last five years. This wholesaler could play the role of cornerstone investor with strong capability in both impact and financial measurement and management to heighten confidence for co-investment. This would help create the array of impact funds across different areas of impact and asset classes that the market is demanding. Our recent pre-budget submission has further details on this and other recommendations such as early stage social enterprise capacity and funding support, contract readiness and social procurement.
There is no doubt that 2020 will be a year we all remember. My hope is this is not just for the challenges Australia confronted but for the positive change that was catalysed and supported by our leaders. This could be the start of a decade that sees widespread recognition that our decisions about money have consequences beyond finance. The beginning of a time when Australians step up and take responsibility for the impact of their consumption and investment decisions. When finally, the impact investing market comes of age and helps accelerate and scale solutions for Australia and the world’s social and environmental issues before it is too late.