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Impact investment needs to stretch horizontally not just vertically

24 April 2020 at 4:30 pm
Ingrid Burkett
Professor Ingrid Burkett and Professor of Practice Alex Hannant consider the emerging field of equity crowdfunding, and the role this could play in provoking dialogue across impact investment about ownership and transfer of wealth, in the first in a series of impact investment provocations.

Ingrid Burkett | 24 April 2020 at 4:30 pm

Alex Hannant


Impact investment needs to stretch horizontally not just vertically
24 April 2020 at 4:30 pm

Professor Ingrid Burkett and Professor of Practice Alex Hannant consider the emerging field of equity crowdfunding, and the role this could play in provoking dialogue across impact investment about ownership and transfer of wealth, in the first in a series of impact investment provocations.

Provocation #1

Internationally, impact investment has focused overwhelmingly on building onto the infrastructure of mainstream investment. The emphasis has been on investment at scale, looking towards attracting institutional investors and using traditional vehicles such as managed investment funds.

While it is necessary to grow the vertical integration of impact investment into this mainstream market to achieve both a degree of scale and legitimacy, this focus overlooks more horizontal opportunities for growing impact investment.

A horizontal focus could increase participation in investment, engage investors in questions of wealth transfer, and democratise and localise impact investment in ways that emphasise equity and impact.

Expanding the pool of investors and the scope of impact investments

This focus on growing institutional investment in impact investment in Australia has limited both who can invest and how. But there are a growing range of mechanisms that could significantly open up both the range of investors, and the types of impact in which they could invest.

For example, crowdfunding has been both overlooked and underestimated as a mechanism to facilitate not only collective funding, but collective impact investment, particularly in respect to start-ups, SMEs and community ownership of assets. This shift from a donation mechanism to an investment mechanism has been facilitated through the legitimisation of both Peer to Peer (P2P) lending and equity crowdfunding.


Infographic showing effect of crowdfunding donations versus crowdfunding equity


Equity crowdfunding is particularly interesting in the context of impact investment as this enables organisations and enterprises to raise money from the general public as “investment” rather than donation – making contributors investors rather than donors. P2P lending also opens up opportunities for a broad range of people to lend money to other individuals, organisations or enterprises, fostering a rethink of both how and from whom impact-focused entities can access capital.

For the purposes of this provocation we will focus particularly on the potential of equity crowdfunding as a “horizontal” mechanism to expand the possibilities of impact investment.

Equity crowdfunding could start to democratise impact investment

To date the field of impact investment has largely been limited to those who have access to managed funds, institutional investment vehicles, or who are sophisticated investors. Equity crowdfunding changes this supply-side dynamic as it enables broader participation in investment, by people who would not or could not engage in more structured, “sophisticated” investment practices.

The investors in an equity crowdfunding initiative gain part ownership of the enterprise and can potentially make a financial return from this investment. If these investments flow into enterprises and projects that are generating impact, then this opens up a whole new cohort of impact investors and a new, much broader space for impact investment. It also democratises impact investment to a degree, or at least begins that process.

In the same way, the investees in impact investment have been limited in terms of meeting risk criteria, or even conforming to particular legal structures. Equity crowdfunding has the potential to stretch the range of “investable” options and opportunities and grow the demand-side into spaces that, quite frankly, might never be considered by traditional investors, but which could potentially deliver significantly more impact than perhaps they could imagine.

Indeed, one of the most exciting potentials of equity crowdfunding as an impact investment mechanism is that it could increase the flow of capital to fund solutions by and for those directly experiencing disadvantage or other challenges. Equity crowdfunding has thus started to open up both opportunities for investors, and the types of investments on offer. It is also opening discussions about what constitutes “impact” with a heightened focus on equity, and a more diverse range of “end users” beginning to set up offers since the platforms require little or no upfront capital.

In 2019, more than $42 million was raised through equity crowdfunding campaigns in Australia and New Zealand. Of course, Australia’s market is still nascent with legislation only introduced two years ago (and initially restricted to public company structures), but the market has grown from around $7 million in its first year to $27 million in its second. Admittedly this is tiny compared with the estimated global impact investment market of $500 billion.

However, its potential lies in the increased access and quality of impacts it could drive rather than merely the quantum of capital it could generate.

While not all equity crowdfunding deals have explicitly been impact investments, many of them have societal benefits embedded in them which could be made more visible and tangible. In addition, there are a growing number of examples on both sides of the Tasman that point to impact enterprises using equity crowdfunding to not only grow their business, but simultaneously embed their communities, members and stakeholders into the fabric of these businesses.

Growing the latent potential for wealth transfer in transformational impact investment

While equity crowdfunding currently has its limitations – such as the size of investment that can be raised by the enterprise or entity, and how much each individual investor can invest – it serves a dynamic, grassroots and underserved part of the impact market.

It also has the potential to realise valuable co-benefits through deepening the relationships between companies, customers, and communities. These ties can help mitigate, or at least insulate against, business risks, by “crowds” helping to strengthen sales of the businesses they invest in, and taking greater ownership of new community initiatives.


The family behind Lagau Malu Aidal Island Seafood plan to use crowdfunding to establish a community-owned facility for local Torres Strait Islander fishing families to contribute to economic sustainability for their community.


It also creates opportunities to bundle “sticky” packages of returns – blending the prospect of financial returns with asset ownership, discounted goods or services, social and environmental impacts, civic pride, and shareholding opportunities beyond the sharemarket.

Over the coming years, it will be interesting to see how equity crowdfunding could be used in the context of:

  • place-based initiatives: enabling a broader “ownership” within community of impact initiatives and ventures;
  • family and clan-based initiatives: enabling inter-generational impact; and
  • cohort/alliance-based impact initiatives: so that capital, benefits and impacts can flow between networked movements and/or to particular groups previously excluded.

This creates an opportunity to really explore the concepts of “ownership” and “asset building” in the context of impact – it puts equity into “equity”.

This is important because despite good intentions, the majority of impact investments are not addressing the systemic imbalance of wealth and power, and the transfer of wealth isn’t a focus of impact. However, we know that participation in asset ownership is fundamentally transformational if we are to address some of the underlying inequities that impact investment so often purports to address.

This is particularly the case given the growing wealth and asset inequality in Australia as seen in this graph from the Oxfam 2018; Productivity Commission.


Graph showing share of Australian wealth in 2017

Growing Inequality of Wealth in Australia presents a challenge for impact investment to explore how to build in wealth transfer and generation if the impact sought is truly to address entrenched disadvantage.

Without a deeper conversation about wealth transfer and ownership in impact investment this field risks perpetuating a charitable and welfare orientation where the “investors” merely replace the “funders” to perpetuate the status quo, and wealth inequality continues to grow poor outcomes.

Explore with us

Given that crowdfunding seems to be here to stay and growing, it should be more prominent in discussions and strategies that pertain to impact investment and market development. It also needs to be better monitored and understood. As a start, we believe the following aspects demand greater investigation:

  • number, purpose and nature of raises and deals;
  • success rates – and the nature of offers that are both successful and unsuccessful;
  • investment totals and average investments raised;
  • access/inclusivity (who is using crowdfunding?) to raise capital;
  • innovations in investment offers and structures;
  • characteristics of investors (for example, 90 per cent of investors in Food Connect, an Australian impact enterprise who recently raised more than $2 million, were women); and
  • performance of investments in relation to both financial returns and impacts generated.

We welcome the opportunity to hear from and partner with anyone wishing to explore metrics, opportunities for more impactful equity crowdfunding models or any of the ideas and issues examined in this provocation. Get in touch


This article is the first of seven provocations from The Yunus Centre which aim to promote dialogue, and contribute to new thinking about the potential for transformational impact investment in Australia, New Zealand and the wider Asia Pacific region.

The purpose in the “We need to talk about Impact…” series is to ask some of the hard questions to interrogate how we can reshape impact investment to ensure that we are actually transforming outcomes for people, places and the planet.

Ingrid Burkett  |  @ProBonoNews

Professor Ingrid Burkett is co-director of The Yunus Centre at Griffith University.

Alex Hannant  |  @ProBonoNews

Professor of Practice Alex Hannant is co-director of The Yunus Centre at Griffith University and co-chair of B Lab Australia and Aotearoa New Zealand (AANZ).

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