The independent Global Steering Group for Impact Investment (GSG) promotes sustainable development and advanced education in impact investment. Chaired by Sir Ronald Cohen, who happens to be a leading light presenter at the Impact Investment Summit, the GSG brings together leaders from the worlds of finance, business, and philanthropy.
The group’s global influence is built on a unique and growing group of National Advisory Boards, from its current 36 member countries and active observers from leading network organisations, with a further 30 National Advisory Boards are under development, many in lower and lower-middle-income countries.
Once per year the CEOs and Chairs of the National Advisory Boards get together for a series of fairly intense working meetings around what’s happening globally in each country and to address the macro issues that need to be focused on over the medium-term.
Australia’s National Advisory Board is represented by Impact Investing Australia, whose CEO David Hetherington attended the 2023 GSG Leadership Meeting in Istanbul, Türkiye, where he met with over 120 impact leaders from more than 45 countries.
I recently spoke to David to hear his reflections and key takeaways from the meeting.
Australian impact developments
The GSG meeting in June came just after the Australian Federal Budget, providing plenty of updates to share with the international impact community. David reported in on Australia’s key impact developments from the budget, including:
- The new $100 million Outcomes Fund that will see the Commonwealth partner with states, territories, and social enterprises to tackle disadvantage by funding projects that deliver outcomes in communities.
- The $11.6 million in funding for a Social Enterprise Development Initiative to support ‘for purpose’ organisations such as social enterprises and charities to build their capability to access capital and support improved social outcomes; and
- The $240 million expansion of the Emerging Markets Impact Investing Fund (EMIIF), which he said was of particular interest to our Asia pacific colleagues.
Impact investment wholesaler
David highlighted that there were plenty of questions about how the Australian impact investment wholesaler was going. This is the idea of a fund that would be co-invested by the government on one hand and private finance on the other that in the impact investing sector on a returns basis.
The answer was: “it’s still alive but not yet adopted”. An impact investment wholesaler was one of the bigger recommendations put forward to the government ahead of the Budget. The government response was that while it’s not going to do a wholesaler now, it is an idea that it will continue to explore through the Investor Roundtable, a forum for government engagement with big finance.
David pointed to the most famous example of a wholesaler globally‚ Big Society Capital a social investment wholesaler in the UK. He said that to a degree that formed a template for many other jurisdictions to follow and is what we’ve kind of been pursuing in Australia.
Interestingly, there was a lot of interest at the GSG meeting about other countries’ wholesalers, with Canada’s recent announcement of a wholesaler coming as quite big news.
Impact disclosures drive change
Further to updating the GSG on developments in Australia, David said that a fair amount of time was spent talking about some of the big changes now taking place in impact investing around the world.
“One of the biggest changes is in the area of impact disclosures. The idea that one of the drivers that will change investor behaviour and corporate behaviour is companies being required to disclose different levels of impact or different impact outcomes on a mandatory basis.”
This idea has been kicking around the ecosystem for years under different institutional guises. But the real change over the past year or so has been that the peak body for global accounting standards, the International Financial Reporting Standards (IFRS) Foundation, deciding to take this challenge on. The IFRS created the International Sustainability Standards Board (ISSB), which is responsible for developing IFRS Sustainability Disclosure Standards, to provide a truly global baseline of sustainability disclosures.
“When we were in Istanbul the IFSB was about to release its first mandatory standards, which it subsequently did at the end of June. Standard One about sustainability and Standard Two about climate. There was a lot of discussion at the meeting about what this meant globally and what it meant for each jurisdiction and how we would all respond to that. The Australian Treasury has just run a consultation related to that and Australia has agreed to accept the ISSB standards. They are mandatory disclosures around particular kinds of impact regarding climate and sustainability impact, for example things like Scope 1, 2, and 3 carbon emissions. So there was quite a lot of discussion around that.”
A different approach in emerging markets
David noted an interesting evolution in the way that people are thinking about impact investing, certainly within the GSG context, around how the emerging markets are doing it a little bit differently to developed economies.
In developed economies the model has been government as a significant player, where there will be a wholesaler, there will be other supporting government investment and co-investment and that will work to accelerate the evolution of the market.
A lot of feedback from emerging countries, particularly some of the African nations, was “it’s different for us because there isn’t a powerful government actor necessarily, so we are having to work a lot in an enterprise first mode. We’re having to work out how to stimulate enterprise growth, how to do market building through micro enterprise and SME growth without necessarily having significant government architecture”.
The GSG’s MIKTA group
Australia is part of a group of medium-sized G20 economies called MIKTA (comprising Mexico, Indonesia, Korea, Türkiye and Australia) that advocates alongside the big powers in the G20. While significant regional economies, they are not the big heavyweight G7 economies. The GSG has a MIKTA group that is about opportunities for collaboration at this mid-tier regional power economy.
David explained there are a couple of interesting things are happening there; one being the chairmanship of MIKTA is moving to Indonesia, a country that is about to establish its own GSG national advisory board.
This is significant for Australia since Indonesia, a country of some 200 million people on our doorstep, is a key part of the global climate solution for reasons ranging from deforestation to coal use.
“For Australian impact investors, particularly those who are looking to diversify, our hope would be that Indonesia is somewhere that warrants attention. EMIIF, which is run by the Commonwealth government’s foreign affairs department, is also quite squarely focused on outbound impact investments into markets like Indonesia. An interesting outcome from the meeting was that things are happening in Indonesia, and we should be actively exploring what’s possible there.”
Generating institutional investment
One other recurring theme was “how do we generate more institutional investment into impact?” In Australia, this question largely relates to superannuation and how we can deploy capital for positive impact as well as financial return. David commented that “we heard the same questions being posed by Spain, the Netherlands, by Britain, by France. This is a consistent problem that each is grappling with in their own ways. How do you stimulate traditional institutional investors to embrace impact opportunities more readily?”
The culture wars
One last notable theme from the meeting was the U.S. representative describing an unusual situation playing out in America, where impact investing has become a battleground of the culture wars, where it is considered “woke capitalism”.
“For example, there are certain U.S. states saying to U.S. institutional investors that if you are investing in climate specific products or other impact products we will divest from your business because we don’t think that’s the role of investors to be intervening in those social and environmental issues.”
David’s American colleagues at GSG were saying that this is a real problem that is reaching the level of court cases, with there being genuine political opposition to impact investing from the right wing of the culture wars.