This is our final edition for the year, thanks for all your support, and keep flying the impact flag!
The most popular story of the year was my interview with Rich Gilmore and the announcement of the Carbon Growth Partners $140 million fund raise.
It was a powerful confluence of forces; amid volatile markets, and in the lead-up to the much hyped COP 26, Rich and the team were able to tap strong demand for climate action with an offering that sought value in an underpriced asset.
Using carbon credits to offset greenhouse gas emissions has only grown in importance since the raise. As more companies make net zero commitments, and as the ‘safeguard mechanism’ is set to further limit expansion of GHG emissions for heavy industry, there will be more demand for carbon offsets than ever before.
With demand comes scrutiny. A review has been ordered of the Australian sector at a national scale. Led by Ian Chubb, the review’s report is due by the end of the year; it will be watched closely.
Social Enterprise On the World Stage
The world of impact investing can roughly be segmented into environmental issues on one side, and social issues on the other.
Of course there’s overlap, but the top two stories for the year offer poignant examples of the key leading developments in the sector.
Funding carbon offset projects covers the environmental side, but the second most popular story was all about the $3.8 million ‘Payment by Outcomes’ trial launched by White Box Enterprises.
In conjunction with the Federal Department of Social Services, it’s focussed on the long-term outcomes for getting people into jobs, and helping them stay there with training and career support.
“We look forward to seeing the role jobs-focused social enterprises can play, alongside the strong disability employment services system we’re creating.” says Social Services Minister Amanda Rishworth.
It’s the third PBO trial under the Australian Government’s Social Impact Investing Initiatives. But it’s unique due to the involvement of social enterprises and impact investors.
The trial was launched at the Social Enterprise World Forum, and it was Luke Terry from White Box that was behind Brisbane’s winning bid to host the event. It put Brisbane on the map globally, and raised the profile of the social enterprise sector in Australia.
Social issues are intrinsically hard to measure. Metrics tend to be qualitative, which makes comparisons of impact performance difficult.
But… this is why the role of impact investors is so vital. Patient capital, dedicated to real-world outcomes, is vital to help overcome these measurement challenges, and ingrain new financial norms.
Diving deeper: I spoke to Ben Smith about how impact investing is expanding at the Paul Ramsay Foundation, HOPE Housing launched a new model of housing co-investment, and I explored the nascent power of the co-op model to empower workers and ignite a new model of equity in corporate ownership.
ESG Faces a Reckoning… From Both Sides
In a stark example of the polarization of our political landscape, we’ve seen the concept of ESG investing being criticized for failing to deliver on sustainability goals, while at the same time being attacked as an anti-capitalist tool of the ‘woke’ agenda.
It’s a tough place to be, and was made even more intractable when Elon Musk used his platform to dig-in the boot.
When Tesla found itself removed from the S&P 500 ESG Index, Elon took to Twitter to vent his rage; angry that Exxon Mobil would hold a place in an ESG index, while his pioneering EV company would be bumped.
The most interesting outcome of the whole debacle was Tesla’s 2022 Impact Report that was released around the same time.
My coverage was one of the most popular articles of the year, as it explored the report’s dismantling of the risk-led approach that ESG takes, looking only at the risks to a portfolio of climate-related risk. As opposed to the more powerful approach of looking at the impacts a company has on the world.
“Many ESG ratings evaluate: “Does this ESG issue impact the profitability of the company?” We need a system that evaluates: “Does the growth of this company have a positive impact on the world?”” says the report.
Long-time readers of OnImpact will be aware of the spectrum of approaches that exist in the world of sustainable investing. ESG has always been the baseline approach, a starting point for investors to begin integrating sustainability factors beyond the traditional financial inputs.
Impact investing on the other hand, is the gold standard. It sits at the other end of the spectrum; requiring a more thorough set of metrics, both quantitative and qualitative, and it looks beyond just portfolio risk, to explore the impact the company and its products are having on the world.
A lot can happen in 6 months, and as we approach the end of 2022 we’re now seeing Republican governors in the US banning ESG mandates for municipal funds, and Blackrock, the world’s largest fund manager, is being divested due to Larry Fink’s focus on sustainability and ‘purpose’.
It’s been a wild ride, and with US election campaigning about to start, it’s only going to get more bumpy.
Profiling our Impact Leaders
One of the most satisfying parts of the OnImpact newsletter is reaching out to the leading practitioners and thought leaders in the space, both here in Australia and around the world.
The impact profile section of the website has proved popular, and it’s become a rich database of the best impact minds available for you to peruse and learn from.
Harry Breidahl is Investment Manager at For Purpose Investment Partners, and his profile was one of the most popular of the year. He did have an advantage, being featured as one of our first articles for the year, but he’s shown himself to be a powerful advocate for impact throughout the year.
Climate-Tech Takes Impact Mainstream
We’ve spoken a lot about the investors, but where would they be without companies to invest in.
And it’s the startups that are most exciting, in particular the new breed of climate-tech startups that are showing the world how you can create a fast growing company, while still having impact at your core.
Nuvoe want to be ‘bigger than Britta’, and they’ve made a great start with a water purification device that can be dropped into any water bottle!
It uses UV light and can be activated with just a shake of the bottle. A magnet on the outside holds it in place, and you suddenly have purified water that cleans your bottle from the inside.
It’s an exciting time to be an impact investor, but most rewarding is the progress of a sector like climate tech that has matured to grab the attention of investors of all stripes.
To me, this is the mark of success. We’re seeing companies take the world by storm that have purpose at the core of their business plan, where impact metrics lead their growth story, and demand is running hot.
2023 is going to be a good year!