by Carly Hammond
When we talk about impact investing, it’s often described more specifically as ‘social impact investing’. Obviously this term helps people new to the concept get a sense that it is about investing in something that delivers good things for society; that it is something potentially extending beyond the traditional investment paradigm of financial return.
But is this description effective in engaging people working in the environmental sphere who have little or no knowledge of impact investing, yet who stand to gain from learning more?
A great deal of activity that happens in the sustainability and conservation space relates closely to people and communities, whether it be behaviour change programs helping householders reduce their energy and water consumption, or Indigenous Australians co-managing large tracts of ancestral land in partnership with government. But I’d suggest that the bulk of the work happening in the sector is less anthropocentric in orientation, such as mitigating the impacts of climate change, protecting biodiversity and ensuring a healthy environment for the sake of well, the planet as a whole, not just people. At a glance, the term ‘social impact investing’ is unlikely to appear that relevant to this work.
Of course, a whole lot is happening in Australia and globally with impact investing delivering positive environmental outcomes along with a financial return. Of the US$60 billion identified as being allocated to impact investment in this year’s GIIN/J.P. Morgan global study, sustainability is a popular arena for making investments (energy 10%, food and agriculture 5%, and habitat conservation 1%), and energy, food and agriculture are the sectors to which the highest number of investors intend to up their stakes over this year. Soon too we will have results around how Australian impact investors are allocating funds, but we already know there is strong investor appetite around sustainability, with NAB and ANZ’s recent green bonds enjoying strong uptake ($300 million and $600 million were raised respectively, invested in green property, wind and solar).
More and more social enterprises with an environmental mission are attracting investment. And perhaps inspired by the holistic approach of BCorps to be companies that are ‘best for the world’, many of these businesses are delivering social and/or cultural impact alongside positive environmental outcomes.
Hepburn Wind Farm and Coonooer Wind Farm are two examples of energy projects that are supporting the growth of renewable energy in Australia, engaging local landholders as shareholders and making a contribution to community-building. In outer Melbourne, PGM Refiners specialises in electronic waste recycling and developing innovative resource recovery technologies. In addition to its environmental mission, the enterprise is also having a social impact, with at least 70% of its front line employees coming from being long-term unemployed. Ashoil, a recent Impact investment Readiness Fund grant recipient that is now on the lookout for investment, is another inspiring local enterprise; an Indigenous owned manufacturer of environmentally friendly fuel, biodiesel as well as a fuel-logistics/transport organisation.
Conservation organisations are becoming aware of the emerging opportunities to harness private capital towards the delivery of environmental outcomes, often in areas where they may have historically relied on government policy or philanthropic grants to bring about change. Internationally, The Nature Conservancy has taken a big leap with the recent creation of NatureVest, with its mission to create investment opportunities that deliver conservation results and financial returns for investors. Water trading and sustainable agriculture are some of the areas being invested in. WWF has also acknowledged the great potential for impact investing to help meet the demands for conservation funding, and has recommended NGOs and investors work together more closely to better realise these opportunities. And closer to home, the Australian Conservation Foundation’s brainchild, the Clean Energy Finance Corporation, is channelling significant amounts of investment capital into the development of clean energy and energy efficiency initiatives.
For a number of environmental organisations with a campaigning arm, divestment has been a focus of their engagement with the finance sector and with noteworthy success of late around fossil fuels. Divestment and negative screening is an important strategy for delivering more responsible investment. But equally important is creating and supporting investments in organisations, initiatives, funds and programs which from the outset, set out to deliver positive environmental outcomes alongside a financial return. Many conservation groups, sustainability focused enterprises and environmental organisations – small and large – stand to gain from taking a look at the role they could play in encouraging more private capital into the pursuit of conservation goals and developing environmental programs that are investable. The more their expertise is harnessed, the greater the environmental impact is likely to be.
Engaging proactively with the finance sector may encompass a shift in the way an environmental organisation has previously done business, often requiring new relationships, new skills, and the desire to innovate. The impact investing movement needs to engage and support organisations on this journey. We can begin by using inclusive language that is relevant to those focused on promoting the health of our planet and sustaining life in all its forms.
Carly Hammond is Director of Communications and Engagement for Impact Investing Australia. Previously she managed communications for the Australian Conservation Foundation.