Impact Investing Presents Opportunity To Back A Better Future Beyond Just Financial Gain
“Rather than #buildbackbetter perhaps we need to question if we want to go “back” and return to how things have been. Perhaps this is a chance not just to return to old ways but to embrace new conceptions, and it will be a shame if we miss it.” Lawyer and podcaster Steven Moe challenges us to rethink the future we want.
Photo: Nauris Ranga/Unsplash
A low interest rate environment gives the opportunity to question past assumptions about returns on investments.
Gone are the yields that came from passive term deposits and this can open up a door to new ways of thinking.
Impact investing is growing and represents a more holistic view of the world. The focus is on more than financial return as these investors are interested in additional measures as well.
A report by the Centre for Social Impact highlights the state of impact investing in Aotearoa.
In it, we set out the ingredients that set impact investing apart and also profile four real life examples to show this is not just theoretical – it’s happening now.
The examples show how real financial returns are sought by investors but are measured in more than interest rates – instead social, environmental, housing or other impacts are
critical as well.
Impact investing is growing and represents a more holistic view of the world. The focus is on more than financial return as these investors are interested in additional measures as well.
An example is the $100 million set aside for the Government’s New Zealand Green Investment Finance. Its remit is to accelerate investment in low emissions projects.
An example is The Tindall Foundation and their work in Northland with Amokura (a consortium of seven Taitokerau iwi chief executives) to help develop a model for bringing forward investment opportunities which are Māori-owned and led and underpinned by a tikanga framework.
These are the types of conversations we need to move from an extractive economy to a more regenerative one. Along these lines a series of four guides on “Tikanga-led impact investment” have also just been released by The Connective.
Still, others are coming to the table in a new way and not from parts of the finance sector you might expect.
Superannuation funds might be regarded as cautious investors. But for the right investment that could change too – recently Generate Kiwisaver invested $20 million via Community Finance to support the building of social housing by the Salvation Army.
The initial round for that has now finished with a total of $40 million raised. The appeal is simple, there is both financial return coupled with social impact.
The best description of impact investing I’ve heard is by Esther Park, the CEO of Cienega Capital. She describes capital being like heat - if we apply it to a kettle then the water inside is the project which gets activated and then transforms into something completely new that wasn’t there before.
In the same way impact investing is about applying capital to a project to transform the ecosystem itself into a new state of being.
What would really accelerate the growth of this sector? If the Government were to embrace the change that impact investment offers then there is the opportunity for real public/private collaboration to solve our most wicked problems.
For example, New Zealand could be a world leader in this if the Government were to stand behind and partially guarantee certain qualifying investment categories that provided both financial return and social or environmental impact. There would be other options too, like Government investing a small percentage in projects to give greater comfort for others to join.
Rather than #buildbackbetter perhaps we need to question if we want to go “back” and return to how things have been.
Perhaps this is a chance not just to return to old ways but to embrace new conceptions, and it will be a shame if we miss it.
Many are considering this offshore and talking about the need to take the chance to reinvent capitalism itself: We should wrestle with this question too.
New approaches will mean collaborating more and partnering to advance the agenda around critical issues that we all know would help across our society and lift us up together on the same tide. Impact investing is not the only solution for our recovery but it will play an increasingly important role as we question our old assumptions about how investments themselves work.
Photo: Nauris Ranga/Unsplash
Published as Opinion piece in Stuff on 22nd November 2020.