IMPACT INVESTMENT 101: when Demand>Supply
When it comes to genuine “impact” investment choices in the Australian market, I think it is fair to say that demand has not been matched with much in the way of supply.
But if we remember our “Economics 101” lectures… with sufficient and sustained demand, there is normally a supply response. It might have taken a while, but we are now seeing the “supply” of impact investing choices increase.
In impact investing, the investment itself, more than just the income it generates, can be used to achieve a social good. We are not talking a donation: this is investing for a commercial return, but the whole of your investment is going to work for good. As Jed Emerson, one of the world’s gurus in impact investing, has often written, impact investing is not just regular investing with a “patina” of impact, it is “all-in” investing; putting the corpus of the investment to work to help achieve a social or environmental benefit.
Until recently, most Australian impact investments have been marketed to ultra-high-net-worth family offices, very large charitable foundations and the corporate/industry superfund market – with minimum amounts rarely less than $1m, often many times this. In addition, most impact investments tend to be single-project focused -funding a green property or a specific renewable energy asset.
A newly launched fund from Impact Investment Group, the Impact Alternatives Fund, gives investors access to a range of impact projects in the one vehicle. While not a “retail” product for private clients (minimum of $100k), it is more accessible than the very large impact investments referred to above. The fund invests in a diversified portfolio of impact investment strategies across renewable infrastructure, impact private equity, impact private debt, social impact bonds, environmental assets and regenerative farming. * For more information, the CEO of Impact Investment Group, Daniel Madhavan , was recently interviewed in the Australian Financial Review:
Meanwhile, the broader “ethical” investing sector continues to boom. At the S&P “ESG Goes Mainstream” webinar I listened to last week, S&P forecast an eight-fold increase in ESG (Ethical, Social and Governance) funds under management over the next 10 years! Likewise, special ASX-listed investment vehicles such as HeartsandMinds (HM1) and the FutureGeneration funds (FGX and FGG) have proved popular with investors looking for exposure to top shelf fund managers with the added benefit that waived fund-manager fees are going to benefit charitable causes.
So, I think that it’s a great development to see some new “impact” investing choices starting to enter the Australian investment landscape and for supply to catch up with demand. I look forward to seeing more opportunities emerge. My request? More impact investment solutions to address housing affordability and accessibility.
Head of Philanthropy | Financial Adviser
E.L.&C. Baillieu Ltd
September 29, 2020
* And to state the obvious: This note is not a recommendation to invest – please discuss this with your financial adviser. Nor is this an advertorial! I have no financial interest in promoting this or any fund.