OnImpact profiles Claudia Kwan, Assistant Portfolio Manager at NorthStar Impact Funds
Claudia Kwan, Assistant Portfolio Manager at NorthStar Impact Funds
What was your first job?
I got a job in a bakery when I was in 13 years old as I thought it was a good idea to start to earn some money (and you got to take home as much left-over baked goods as you wanted!).
When did you know you wanted to work in finance/business?
When I was in Year 10, we had to do work experience. All my friends decided to go to fashion houses, law firms and hospitals but I decided to go to the Futures Exchange. Back then it was a live trading floor with trading pits, a lot of sound and action. I was top in my class for economics and pretty handy at maths, so I then went on to study Commerce/Law at University majoring in Finance. My vision was always to use finance to play a role in emerging markets or underserved communities. Whilst at university I volunteered in Costa Rica for 3 months helping to build a trail to a waterfall that ran off a Volcano and as a result, the water was a vibrant blue colour. The trail still exists today, and you can see it on social media as a thriving eco-tourist destination. My aim was to work in infrastructure finance for projects in developing countries.
I then went to China on university exchange to study mandarin in a province called Yunnan and was captured by Eastern medicine and Dao Philosophy. I enrolled to study Chinese Medicine after I had just graduated with my Australian degree. I came back to Sydney for 2 weeks and was offered a role as an investment analyst at a boutique hedge fund and decided to combine that with part-time study of Chinese Medicine.
When did you first discover the concept of Impact Investing?
During my time in Costa Rica, I saw the power of capital to create positive change in people’s lives. Similarly, I saw in real time, how strong GDP growth in China pulled 500 million people poverty. I saw country-style roads turn into 8 lane highways in months; skyscrapers erect from the ground (in what felt like a matter of weeks); the airport had only a few gates when I arrived and now has 88 boarding gates. I got a front row seat in China’s approach to long-term strategic allocation of capital with the aim of creating a financial and social return.
It was not until many years later, however, whilst working at a global ESG hedge fund that I met Kerry Series from NorthStar Impact. I realised that many of the company’s I had invested in were in fact “impact companies”. Kerry articulated the process and philosophy through his fund that completely resonated with how I believed capital should be allocated, for financial and social return. He added additionality as a key pillar of impact investing and I think I responded, “wow, I never knew an equities fund like this existed”.
What’s one exciting development you and your team have in the pipeline?
There are so many. We have a long list of projects ranging from improving waste recyclability and waste carbon abatement in Australia to improving education levels via remedial tutoring programs to rethinking how Australia approaches critical mineral extraction.
We look at system-wide solutions to complex problems and try to ascertain where the bottleneck exists, which is typically a result of a lack of economic incentive or some sort of social hurdle.Australia has a waste problem. It is estimated that the equivalent of 10% of Australia’s current carbon emissions can be abated if we employed better collection, recycling and disposal (waste-to-energy) practices. We have the technology; we have the national interest and targets and so it is really unpacking the bottlenecks and ensuring that the risk reward profile is attractive enough to mobilise private sector investment.
What was the most interesting impact deal (from any team across Asia/Pacific) in the past 12 months?
NorthStar is the only Australian equities impact fund certified by the Responsible Investment Association Australasia (RIAA). Additionality is a key pillar of NorthStar’s impact investing process as we aim to scale, extend and accelerate the impact of our investee companies. We do this by participating in new capital raisings, impact projects and via company and stakeholder engagement. We have multiple examples of this but notable to me was the Neoen capital raising we participated in earlier this year.
Neoen, an independent renewable energy company raised 750mn Euros to increase capacity. The result is that earlier this month the company raised its adjusted EBITDA target for 2025 after winning a contract from AEMO (Australian Energy Market Operator) for the Collie Battery Stage 1 for a 197 MW / 4-hour capacity services contract. This will be Neoen’s first long-duration battery and supported by the capital provided in the rights issue by existing shareholders including NorthStar.
Name one high impact company (globally) that investors should keep their eye on?
The world has become reliant on virgin oil and gas in consumables which is no longer sustainable. However, without any scalable chemical recycling solution and the limitations of mechanical recycling, we need to find alternative packaging solutions. Origin Materials has a negative-carbon packaging solution, using woodchip as a feed-in stock instead of oil and gas. They have a $9.3bn backlog of customer demand (offtake agreements and capacity reservations) from companies such as Pepsico, Nestle, Danone, Ford, and LVMH as the world’s largest FMCG companies look for solutions to reducing their environmental footprints. Origin estimate a $1trn market opportunity for their negative-carbon products. They are currently in the construction phase of their manufacturing plants and as such are pre-revenue. We continue to monitor Origin Material’s development as we are focused on reducing oil and gas consumables and hard-to-abate waste products. By 2030, Origin’s operating plants are expected to annually avoid ~8.3MMT CO2 equivalent to approximately 960,000 home’s electricity use for 1 year, 1.8mn cars driven for 1 year or 19mn barrels of oil consumed.
What’s your vision for impact investing in 5 years’ time?
The impact investment industry’s performance crowds in mainstream capital, corporates, asset allocators, governments and philanthropy to work collaboratively to enact system-change outcomes. Perhaps the next Warren Buffet or Ray Dalio is an impact investor!
Equity Trustees Limited (“Equity Trustees”) (ABN 46 004 031 298) AFSL 240975, is the Responsible Entity for the NorthStar Impact Australian Equities Fund (“the Fund”). Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). The Investment Manager for the Fund is North Star Impact Pty Ltd (“NorthStar”) (ABN 56 635 773 974), an Authorised Representative of Longreach Alternatives Pty Ltd (“Longreach”) (ABN 25 082 852 364) AFSL 246747.
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