Social Impact Investing SPEAKER: Andrew Major, General Manager Unlisted Assets, HESTA HOST: Tim Ironside, Education Manager, AIST
Setting the scene 1. Does your fund consider the positive (or negative) impact of 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
Strategic approach Objectives Benefits Execution Partnership • • A diversified source of Execute investments with Partnership with Social “As universal and long -term investment returns positive social impact aligned Ventures Australia allows HESTA stewards of a large and • A range of social and/or with members’ values and to utilise the skill, expertise and growing pool of capital from environmental benefits which generate financial net assistance of SVA to make direct a broad population of • Brand and reputation value return to members and indirect investments in members, superannuation • from demonstrated Support innovation and Australia in a range of social funds are uniquely placed to leadership in responsible development in the sectors enterprises and businesses with understand and take investment in which a majority of HESTA a specific focus on delivering advantage of the benefits • Experience in the members work identifiable and quantifiable from impact investment” • development of innovative Engage with other social impact, primarily in the investment practices stakeholders to help build health and community services including the creation of the Impact Investment sectors new investment vehicles market in Australia
Sole purpose & benefit to members Super funds exist to provide benefits to members Trustees have an obligation to make decisions in the best interests of 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
Investing for impact or impact investing Investing for impact • Many investments in our portfolio have a positive impact, whether environmental, social or economic • Primary question is risk/return outcome, with impact an output or “secondary” consideration Impact investing • Primary motivation is to deliver definable and measurable social, environmental or economic impact • Must also produce a market-based financial return
HESTA Impact HESTA’s Responsible Sustainability Advocacy overall Investing 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 organisation, and ➢ Advocacy which extends beyond our organisation and influences positive change in equity and retirement outcomes for our members and their communities .
Focus on housing: return profile • 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: affordability • 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)
Question • 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
Nightingale Village • 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
Glenview (Korongee dementia care facility) • 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
Question • 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
Strategy evolution Broader understanding of “impact” • Sustainable development goals (“ SDGs ”) provide a frame of reference for considering the “impact” of our investments, broader than the original intention of the impact investment program • Seven goals identified as being strategically important to HESTA Reflected in HESTA’s responsible investment principles • 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
Strategy evolution – SDG mapping 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 Infrastructure Property Private Equity Listed Equities
Portfolio impact snapshot Incubation: Institutional: Sector-specific SDG-aligned SVA/SIIT “Impact” funds Healthcare property (PE/VC) Incubation: Mainstream Instituational: (SDA) General Sector-specific Renewables Life sciences VC LeapFrog PPP strategies/ build Sustainability-focused to rent PE Social & affordable “Green” property housing Healthcare property (SDA, aged care)
Recommend
More recommend
