management . ABP has committed to invest 58 billion euros in sustainable and impact investments by 2025 , with a focus on areas like renewable energy , clean technology , and sustainable development projects . This represents a significant portion of the fund ’ s total assets , reflecting a strong commitment to integrating impact goals into its broader investment strategy .
Closer to home , Rest Superannuation fund has announced a target allocation of 1 % of their $ 67b portfolio will be directed to investments meeting their definition of impact .
While the move towards impact investing offers promising opportunities , it also presents challenges for pension funds – scale and market depth , performance metrics and risk assessment .
Despite these challenges , pioneers in this space are finding innovative solutions and proving that impact investments can provide competitive returns .
For instance , the California Public Employees ’ Retirement System ( CalPERS ), the largest pension fund in the U . S ., adopted an Investment Beliefs policy in 2013 . One of these beliefs states that “ long-term value creation requires effective management of three forms of capital : financial , physical , and human .” Guided by this belief , CalPERS has made significant impact investments in clean energy and sustainable real estate . Their ongoing efforts to quantify the long-term benefits of these investments provide valuable data that can encourage further participation in impact investing .
The attraction of investments with impact is likely to grow for providers of institutional capital . In Canada , for example , the Caisse de dépôt et placement du Québec ( CDPQ ), with net assets over 365 billion Canadian dollars , recently announced a target to increase its low-carbon assets by 50 % by 2025 . And the UK ’ s National Employment Savings Trust ( NEST ), a workplace pension scheme provider , announced it would invest 1.2 billion pounds into private markets , including impact investments .
ACCESSING IMPACT CAPITAL Impact capital symbolizes a profound pivot in investment theory , departing from the traditional perspective that saw social and environmental impact as secondary considerations or even incongruous to financial returns . Instead , there ’ s growing recognition that these elements can exist in harmony , mutually reinforcing each other . This has led to the evolution of investment philosophy towards “ double bottom line ” ( profit and impact ) and “ triple bottom line ” ( profit , impact , and sustainability ) investing .
How can economic development professionals use this shifting paradigm to capture investment capital for the projects that matter most to Australians ? Mobilizing impact capital necessitates financial innovation , the creation of financial instruments and vehicles that allow investors to align their investments with their impact goals .
Products such as social impact bonds , green bonds , and development impact bonds can be designed to allow for the injection of private capital towards public good – and if done with the right approach to scale , these initiatives can create systemic change .
Mobilizing impact capital necessitates financial innovation , the creation of financial instruments and vehicles that allow investors to align their investments with their impact goals .
One of the pioneering examples of successful impact investing in Australia is the implementation of Social Benefit Bonds ( SBBs ). For example , the Newpin SBB , launched by Social Ventures Australia ( SVA ) and the New South Wales Government in 2013 . The aim was to restore children in out-of-home care to their families or prevent children from entering care . As of June 2020 , the bond had generated a 13.2 % p . a . return for investors , significantly exceeding its initial target . The Newpin program had achieved a restoration rate of 63 % overall , allowing 203 families to be reunited .
Design of financial instruments relies on clearly defined objectives , an understanding the local and global investment landscapes , measuring and reporting the impact as well as managing the financial returns .
Adding to this is a consideration of scale . To achieve system change – which I think should be the focus of a contemporary impact approach , we need to think of scale as beyond replication .
Let ’ s consider the Newpin SBB example , for the 203 families involved , this approach was life changing . Should we do it at scale ? Absolutely . Does “ scaling ” the investment involve issuing another bond and helping another 200 families or can we aim higher ?
For true impact the approach to family unification taken by the NSW Government as a whole should be changed based on the lessons learned . If the investment can pay dividends to shareholders , better serve families and benefit society broadly then I would argue it no longer be the domain of private capital instead the challenge becomes one for government to accept . That ’ s real scale , because that ’ s system change – it ’ s up stream .
By aligning financial incentives with social and environmental goals , impact capital can transform the way we tackle our most pressing global challenges . As we move forward , it is our collective responsibility to ensure that this transformative potential is fully realized , setting a new course for sustainable , inclusive economic development .
ABOUT THE AUTHOR
NEDC23 SPEAKER
MARY DELAHUNTY Mary is the founder and Managing Director of Seven Advisory , helping companies progress with purpose and Impact . Previously Mary was the Head of Impact for HESTA a $ 78B superannuation fund leading the responsible investment , government relations and CSR programs . She has held senior roles in financial services organisations for over 15 years and is passionate about authentic progressive capital delivering a better world for all . Mary is a 2015 Churchill Fellow awarded for the completion of international research on equity for women in pension systems . She is a current Board Member of The Emergency Services Telecommunication Authority ( 000 ), Victoria University , The McKell Institute and Emily ’ s List Australia . Mary has served as the Chair of the Ministerial Advisory Council for Gender Equality in the State of Victoria and was a past Chair of Reclink Australia . Mary is a former Mayor , Deputy Mayor and elected Councillor for an inner-city municipality and holds a Master of Finance ( Corporate Advisory ).
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