Predictions for 2021: Impact investing
8 February 2021 at 5:57 pm
The pandemic has opened the door to a new wave of impact investing, writes Sally McCutchan OAM, in the latest in our series of predictions about what the social economy can expect from 2021.
The human suffering caused by COVID-19 has disproportionately hit those who are most vulnerable. It has shone a light on structural issues and areas of weakness in our economic systems, in addition to the injustices deeply embedded in our societies. If there is a silver lining from an otherwise challenging 2020 it is the widespread shift of focus from purely financial and economic returns to those that also improve social and environmental outcomes.
We are witnessing an acceleration of impact investing around the world further catalysed by the negative impacts on communities and economies of the pandemic. For some this was further exacerbated by bush or wildfires adding significant loss of biodiversity, flora and fauna to the mix of devastation.
There has been exponential growth in Australia in the last few years – more than tripling over the past two years (RIAA’s 2020 Benchmarking Impact report) – a trend consistent with other countries.
In BlackRock’s 2020 Global Client Sustainable Investing Survey of 425 investors representing an estimated US$25 trillion in assets under management, 20 per cent of respondents agreed that the pandemic will accelerate their sustainable investing.
Here the impact investing market has grown to $19.9 billion, and with the right policy framework we could see many more investments lead to the creation of jobs in sectors of the economy which are aligned with better social and environmental outcomes.
In 2019, the Expert Panel of the Social Impact Investment Taskforce, of which I am a member, was tasked with developing a strategy for the Commonwealth’s role in the SII market. This included identifying additional solutions to address entrenched disadvantage using private capital investment.
The Interim Report had strong alignment with the work already undertaken by Impact Investing Australia including consideration of an impact investment wholesaler. The final report has been completed and we look forward to its release and findings this year. We are optimistic that its recommendations will both align with those of Impact Investing Australia and gain meaningful traction with government.
Our pre-budget submission outlines the policy ask of Impact Investing Australia in more detail with other recommendations including: an early stage social enterprise fund, a Commonwealth social procurement policy, and go to places within and external to the government to drive data and measurement consistency, awareness raising and knowledge development.
We are particularly excited about the possibility of an Australian impact investing wholesaler in 2021. A wholesaler, like the UK’s Big Society Capital, would be a game changing institution with the capital and mandate to drive impact investing in Australia to effectively support the post-COVID recovery.
The wholesaler would provide opportunities to rebuild an economy that is resilient to future shocks. It would drive job creation for disadvantaged Australians and regions plus re-balance our labour markets to provide greater opportunities for women and job security for young people. It could also safeguard progress towards the UN’s sustainable development goals and “closing the gap” for our Indigenous communities.
We are hopeful that 2021 will be remembered as the year where impact investing accelerated in Australia and governments, investors and social innovators worked together to rebuild an economy to meet the needs of future generations.
2020 was our 1,000 decibel wake up call. There is an urgent need to transform our economies, so they better serve society, and it is incumbent on all of us in 2021 to do our part to make that happen.
This article is part of a series of 2021 predictions from experts across the social sector.