In the last few weeks, at least three events have helped to move forward the awareness of how impact investment is developing as a sector in New Zealand – the RIAA New Zealand conference and the Mercer Investment Forum in September, and the Global Steering Group summit conference last week which saw New Zealand become the 19th member of the GSG, opening up new opportunities in the two way flow of knowledge and experience with the G8 founder members and those who have joined since it was established in 2015.
Impact investing is moving from being an esoteric movement on the fringes of mainstream asset management thinking to being the main path driving us towards impact economies, as we respond to the increasing demands of investors that their money be managed in a way that has either a social or an environmental impact as well as a financial return.
Our iwi have always thought in these terms about investing, and their intergenerational thinking sets a high standard for all of us, helping to focus us on the time it takes to nurture our land, our water and our natural environment. New Zealanders have a wonderful tradition of giving, and are learning how investing can fit alongside giving; in the last year we have seen six or seven impact investing funds set up around the country – often working on a regional level and seeking to have impact on social issues in the community, and moving from giving to investing in return for measurable results. We are showing the world how quickly an impact movement can grow from the grass roots, rather than from the top down.
At the same time, the scale of some of the environmental issues we have to tackle will require large financial transactions which cannot be funded at regional levels, but will require national, institutional and possibly international support. And every month we learn about new ways of funding social and environmental outcomes that have worked in other countries and can be tried in New Zealand, in the same way as we are able to tell others how we are doing things.
If we look across the spectrum of capital market instruments, from plain vanilla equities and fixed income at one end of the scale to pure philanthropy at the other, purists will argue that ‘real’ impact investing must be intentional, measurable, and scalable (what Toniic calls ‘deep impact’). These assets are almost by definition illiquid long term investments, and cannot fit in all portfolios. But as interest in socially responsible investing, in shareholder activism and in ESG grows across the market, all investors are seeking to invest with purpose. And asset classes are developing to accommodate this. The broadening interest in impact investment is leading both investors and investees to look at the effect of their financing – whatever we choose to call it, the outcomes for the beneficiaries of these deals, either social or environmental, either regional or international, are improvements to lives. In New Zealand and across the world, this is a movement we should welcome wholeheartedly, because government and philanthropy cannot do this alone.
David Woods is Chairman of the Impact Enterprise Fund