Investors are realising they can do good with their capital without having to sacrifice the financial return. And fund managers and institutions are responding with new products to cater for a significant increase in demand.
The Benchmarking Impact Report 2018 has just been published by the Responsible Investment Association Australasia. It provides an in depth analysis of the current Australian impact investment market.
For the purpose of the report, impact investments were defined as those investments:
- intentionally seeking to create positive social and/or environmental benefits;
- measuring both the social/environmental and financial performance of these investments; and
- deliberately seeking financial returns (ie. not grant-making)
Measuring financial returns is easy but measuring the social and environmental impact is challenging but continually improving. The United Nations Sustainable Development Goals provide a commonly used framework for measuring impact.
The impact investment market in Australia has grown by 105% pa between 2010 and 2017. The growth of 143% in the past year takes the total funds invested to $5.8 billion. While it’s small in relation to the total investment funds in Australia, the US/Europe experience suggests we are only seeing the beginning.
What’s the aggregate impact have the funds in the report have made?
Source: RIAA Australian Impact Investment Activity and Performance Report 2018
If you could invest your money, achieve a market rate return and at the same time help make the world a better place – what’s not to like! It feels good to know you are investing in assets or businesses that help improve education, wellbeing, health or the environment and community.
Unfortunately for now, access to impact investments is confined almost solely to wholesale or sophisticated investors. This means it’s largely super funds, institutions, philanthropic funds and high net worth families and individuals. Such is the nature of green bonds, property syndicates and venture capital funds.
As the sector continues to mature, one challenge will be providing investment opportunities that retail investors can access.
I encourage you to take a look at the full report. You can access the Australian Impact and Investment Activity Performance Report here. The report is published by the Responsible Investment Association Australasia in partnership with the Centre for Impact, Swinburne University and supported by Impact Investment Group.