Social Impact Investing SPEAKER: Andrew Major, General Manager - - PowerPoint PPT Presentation

Social Impact Investing

SPEAKER: Andrew Major, General Manager Unlisted Assets, HESTA HOST: Tim Ironside, Education Manager, AIST

1. Does your fund consider the positive (or negative) impact

• f your investment activities?
• Never
• Sometimes
• Most of the time
• Always

2. Do you think impact investing is consistent with a super fund’s obligations under the “sole purpose” and/or “member benefit” tests?

• Yes
• No
• Unsure

Setting the scene

Benefits

“As universal and long-term stewards of a large and growing pool of capital from a broad population of members, superannuation funds are uniquely placed to understand and take advantage of the benefits from impact investment”

• Execute investments with

positive social impact aligned with members’ values and which generate financial net return to members

• Support innovation and

development in the sectors in which a majority of HESTA members work

• Engage with other

stakeholders to help build the Impact Investment market in Australia

Execution Objectives

• A diversified source of

investment returns

• A range of social and/or

environmental benefits

• Brand and reputation value

from demonstrated leadership in responsible investment

• Experience in the

development of innovative investment practices including the creation of new investment vehicles

Strategic approach

Partnership with Social Ventures Australia allows HESTA to utilise the skill, expertise and assistance of SVA to make direct and indirect investments in Australia in a range of social enterprises and businesses with a specific focus on delivering identifiable and quantifiable social impact, primarily in the health and community services sectors

Partnership

Super funds exist to provide benefits to members Trustees have an obligation to make decisions in the best interests of members

Sole purpose & benefit to members

To ensure that it performs its sole purpose responsibility and exercises its investment powers in the best interests of members, a prudent trustee should exercise care, skill and diligence to ensure that its impacts, alongside financial returns, are positive rather than negative

• Many investments in our portfolio have a positive impact, whether environmental, social
• r economic
• Primary question is risk/return outcome, with impact an output or “secondary”

consideration

Investing for impact

• Primary motivation is to deliver definable and measurable social, environmental or

economic impact

• Must also produce a market-based financial return

Impact investing

Investing for impact or impact investing

HESTA Impact

Sustainability Responsible Investing Advocacy HESTA’s

• verall

impact

• HESTA Impact encompasses all of the ways that we reduce our negative impact on society and the

environment and how we create positive value for our members and broader society

• Our impact can be thought of in several layers:

➢Sustainability which relates to our internal practices as a responsible organisation (e.g. carbon

neutrality, social procurement)

➢Responsible Investment which includes the engagement and investment activities of the

• rganisation, and

➢Advocacy which extends beyond our organisation and influences positive change in equity and

retirement outcomes for our members and their communities .

• 14% of households in Australia are unable to afford private

market rental without some form of assistance

• Investment in social and affordable housing generally involves

purchasing housing stock on the private market, then leasing the stock to housing tenants at between 25% (social housing) and 80% (affordable housing) of the private rental market rate

• It is difficult to achieve a market-based financial return without

an innovative structure or government intervention or policy support

Focus on housing: return profile

• Australian dwelling prices have grown much faster than

incomes, creating an affordability issue

• Housing and rental affordability in areas close to where our

members work are key issues

• The value of land in suburbs within close proximity to the CBD

has risen sharply

• The model for affordability is based upon:

➢ Reducing up-front cost by reducing “developer margin”

(Nightingale model)

➢ Shared ownership model (Barnett model)

Focus on housing: affordability

• Which of the following factors do you consider to be most

important in relation to affordable housing developments?

• Housing for purchasers
• Private rental housing
• Housing close to major city CBDs
• Housing close to work locations

Question

• A future precinct on Duckett Street in Brunswick, Victoria
• A collection of six neighbouring buildings, each designed by a

different architect using the social, environmental and financial sustainability principles

• Development of close to 200 units, developed at cost for

purchasers (~20% below market value), with a focus on sustainability and carbon neutrality

• Ballot system for “eligible” purchasers, including key

contribution workers

• Allocation of units to CHPs Women's Property Initiative and

Housing Choices Australia

• HESTA provided subordinated loan to support construction of

the development, with expected double digit return

Nightingale Village

• Australia’s first residential village designed for people living

with dementia

• International best practice from the Netherlands
• Residents manage their own households and are supported by

staff

• Loan from Social Impact Investment Trust to Glenview to

support construction of the facility

• Return is consistent with “construction loans” provided in the

broader HESTA property portfolio

Glenview (Korongee dementia care facility)

• Having considered the discussion about affordable

housing, what do you believe is the most important feature?

• Social benefits to individuals and communities
• Financial benefits to investors
• Both social and financial benefits are equally

important

Question

Strategy evolution

• Sustainable development goals (“SDGs”) provide a frame of reference for considering the “impact” of
• ur investments, broader than the original intention of the impact investment program
• Seven goals identified as being strategically important to HESTA

Broader understanding of “impact”

• Focus on contributing towards the 7 strategic areas of impact identified as aligned with the Fund’s

strategy and members’ interests, which are aligned with the SDGs

• Brings strategic focus to making investments that positively contribute to these strategic areas and

applying a long-term investor mindset

Reflected in HESTA’s responsible investment principles

Strategy evolution – SDG mapping

Infrastructure Property Private Equity Listed Equities 15 Life on Land 12 Responsible Consumption and Production 11 Sustainable Cities and Communities 9 Industry, Innovation and Infrastructure 7 Affordable and Clean Energy 6 Clean Water and Sanitation 5 Gender Equality 4 Quality Education 3 Good Health and Wellbeing 2 Zero Hunger

SVA/SIIT Healthcare property (SDA)

Incubation: Sector-specific

LeapFrog

Incubation: General

PPP strategies/ build to rent Social & affordable housing Healthcare property (SDA, aged care)

Instituational: Sector-specific

“Impact” funds (PE/VC)

Institutional: SDG-aligned

Renewables Life sciences VC Sustainability-focused PE “Green” property

Mainstream

Portfolio impact snapshot