Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 88

Impact investing – Australian market in 2014

A reader, Josh, sent us the following question, and we asked Ian Learmonth of Social Ventures Australia (SVA), a pioneer in Social Benefit Bonds, to respond:

“Hi, can you tell me about Impact Investment, how do I do this, and where do I go?"

‘Impact investing’ refers to investment with the intention to achieve both a positive social, cultural or environmental benefit and some measure of financial return. Global and local predictions say the market could reach 1-2% of funds under management in the coming decade, translating to a figure of around $30 billion in the Australian context.

While there have been some challenges in unlocking the potential of this new market in Australia, there are a number of exciting signs that the market is well on its way to becoming a thriving and trusted asset class.

Socially-minded investors, including a number of super funds, banks, foundations, trusts, private ancillary funds and individuals have already backed the market by investing money in current impact investing products. In the case of the Newpin Social Benefit Bond and SVA’s Social Impact Fund, they have received returns of around 7% pa. Just last month NAB pledged $1 million to help build the market in Australia, and QBE made a US$100 million commitment to invest in global impact investing opportunities such as Social Impact Bonds (SIBs).

In Australia SVA, Foresters and Social Enterprise Finance Australia (SEFA) each manage funds that provide loans and equity investments to social enterprises, seed funded from a combination of government and private money. There are currently seven businesses in the SVA fund’s portfolio and our pipeline has looked increasingly strong over the past six months. In a recent deal the Impact Investment Group, based in Melbourne, closed a $95 million property deal in Geelong generating financial, environmental and social benefits to the community.

The growth of organisations like the School for Social Entrepreneurs, Social Traders and Small Giants is also encouraging, meeting a significant need on the supply side of the investment equation through building the business planning, operations, governance and measurement expertise of the social organisations, so that they can become ‘investment ready’ and attract the type of funding offered by more established funds.

Finally, impact investing has received attention in the interim report of the Financial Systems Inquiry, showing that the structural changes are beginning to take shape. The establishment of Impact Investing Australia as an advocacy organisation should generate greater strategic alignment between government, investors, investees and intermediaries.

At SVA we’ve had a front row seat to both early successes and some of the trials involved in getting the market up and running. And while issues like the difficulty of matching supply and demand, the need for more suitable legal structures, and limits to the large scale deals available do present challenges, we’re confident there is requisite enthusiasm among stakeholders to construct a way forward.

Impact investing pioneer Sir Ronald Cohen likens the state of the market today to that of the venture capital market in the 1970s. In his words “It could take another 10 to 20 years for demand for capital to fully respond to increased supply.” Recent developments show that we’re heading in the right direction.

 

Ian Learmonth is Executive Director at Social Ventures Australia (SVA) responsible for heading up its Impact Investing team.


 

Leave a Comment:

     

RELATED ARTICLES

Responsible investing is now retail and mainstream

Investment learnings from the COVID-19 crisis

ESG by new means, to new ends

banner

Most viewed in recent weeks

Welcome to Firstlinks Edition 433 with weekend update

There’s this story about a group of US Air Force generals in World War II who try to figure out ways to protect fighter bombers (and their crew) by examining the location of bullet holes on returning planes. Mapping the location of these holes, the generals quickly come to the conclusion that the areas with the most holes should be prioritised for additional armour.

  • 11 November 2021

Why has Australia slipped down the global super ranks?

Australia appears to be slipping from the pantheon of global superstar pension systems, with a recent report placing us sixth. A review of an earlier report, which had Australia in bronze position, points to some reasons why, and what might need to happen to regain our former glory.

Welcome to Firstlinks Edition 431 with weekend update

House prices have risen at the fastest pace for 33 years, but what actually happened in 1988, and why is 2021 different? Here's a clue: the stockmarket crashed 50% between September and November 1987. Looking ahead, where did house prices head in the following years, 1989 to 1991?

  • 28 October 2021

How to help people with retirement spending decisions

Super funds will soon be required to offer retirement income strategies for members in decumulation. With uncertain returns, uncertain timelines, and different goals, it's possibly “the hardest, nastiest problem in finance".

Tips when taking large withdrawals from super

You want to take a lump sum from your super, but what's the best way? Should it come from you or your spouse, or the pension or accumulation account. There is a welcome flexibility to select the best outcome.

“Trust your instinct” Hamish Douglass in conversation with Sir Frank Lowy AC

Sir Frank shares his story, including his journey from war-torn Europe, identifying opportunities, key character traits necessary for business success, and the importance of remaining paranoid yet optimistic.

Latest Updates

Investment strategies

Charlie Munger and stock picks at the Sohn Conference

The Sohn Australia Conference brings together leading fund managers to chose their highest conviction stock in a 10-minute pitch. Here are their 2021 selections with Charlie Munger's wisdom as the star feature.

Interviews

John Woods on diversification using asset allocation

All fund managers now claim to take ESG factors into account, but a multi-asset ethical fund will look quite different from a mainstream fund. Faced with low fixed income returns, alternatives have a bigger role.

SMSF strategies

Don't believe the SMSF statistics on investment allocation

The ATO's data on SMSF asset allocation is as much as 27 months out-of-date and categories such as cash and global investments are reported incorrectly. We should question the motives of some who quote the numbers.

Investment strategies

Highlights of reader tips for young investors

In this second part on the reader responses with advice to younger people, we have selected a dozen highlights, but there are so many quality contributions that a full list of comments is also attached.

Investment strategies

Four climate themes offer investors the next big thing

Climate-related companies will experience exponential growth driven by consumer demand and government action. Investors who identify the right companies will benefit from four themes which will last decades.

Investment strategies

Inflation remains transitory due to strong long-term trends

There is momentum to stop calling inflation 'transitory' but this overlooks deep-seated trends. A longer-term view will see companies like ARB, Reece, Macquarie Telecom and CSL more valuable in a decade.

Infrastructure

Infrastructure and the road to recovery

Infrastructure assets experienced varying fortunes during the pandemic, from less travel at airports to strong activity in communications. On the road to recovery, what role does infrastructure play in a portfolio?

Economy

The three prices that everyone should worry about

Among the myriad of numbers that bombard us every day, three prices matter greatly to the world economy. Recent changes in these prices help to understand the potential for a global recovery and interest rates.

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.