Impact investing has long promised a new frontier – mobilising capital for positive social and environmental outcomes without sacrificing financial returns. But despite a decade of effort, Australia’s impact investing market has not yet hit its stride. Where have we got stuck?
At the recent Impact Investment Summit Asia Pacific, a panel hosted by Impact Investing Australia (IIA) set out to interrogate that very question. The discussion was deliberately fearless, aimed at stripping back assumptions, airing frustrations, and asking whether we need to rethink how the sector is defined and executed.
Moderated by IIA CEO, David Hetherington, the panel featured three experience institutional investment professionals: Richard Brandweiner (Executive Director, Australian Ethical and Chair, Impact Investing Australia), Gillian Gordon (Head of Alternative Investments & Responsible Investing, JB Were) and Rachel Halpern (Head of Sustainability, JANA). But the real energy came from the interaction with the audience – with unfiltered, live questions and comments. The result was a session that lived up to its promise: frank, challenging and ultimately hopeful.
Too niche, too fragmented, too confusing
One of the biggest takeaways was that the impact investing community in Australia is often inward-looking and focused on itself. Multiple participants noted the difficulty in engaging broader investor audiences, in part because the sector hasn’t done a good job of articulating what impact investing really is – or why it matters commercially.
As one attendee put it: “We haven’t done ourselves any favours with the name.” Is it concessional or not? Should investors expect lower returns, or not? For many institutional clients, the lack of clarity is a deal breaker. If the basic proposition is unclear, risk-averse investment committees will walk away, particularly since reputational stakes are high.
The role of institutional capital
The elephant in the room remains the absence of institutional capital at scale. With super funds managing the largest pools of capital in the country, many in the sector still see them as key to unlocking growth. But blockers exist on both the buy-side and the sell-side.
On the sell-side, local impact funds are often young, small and founder-led, relying on personal networks that are now exhausted. They operate in silos, with little shared insight into what institutional allocators are actually looking for. Many target sustainability teams that lack decision-making power, while missing the mark with those who do, by focusing too heavily on impact rather than risk-adjusted returns.
On the buy-side, there’s a general lack of understanding and, in some cases, lingering caution from early disappointments. Some allocators are sceptical that ESG leads to better returns, let alone impact. Others feel that supporting niche or sub-scale products exposes them to career risk. And crucially, there’s often no strategic top-down directive to prioritise impact, leaving initiatives to languish.
One audience member responded: “Investors are having an impact (positive or negative) regardless. (I) agree with focusing on outcomes.”
Redefining the rules
A particularly pointed part of the discussion focused on the mathematics of impact. If you’re measuring something in addition to financial return, that must come at a cost – unless there’s a compensating factor, such as innovation, subsidy, regulatory arbitrage or customer willingness to pay more.
Is it possible to deliver impact at scale without compromising returns? One attendee said: “It is very difficult to deliver intentional and additional impact at scale without compromising returns, if not impossible, without concessionary capital in the stack.” Another participant added: “Impact at scale can lose the label and be seen as more mainstream thematic investing.”
The blurred line between ESG and impact led to a broader debate on terminology. If you were launching a fund today, would you even use the word ‘impact’? Some said no, believing the term has become politically loaded or misinterpreted. Others argued for reclaiming the label but with clearer definitions and expectations.
Additionality, contribution and the grey area in between
A hot topic was the concept of additionality – the idea that an investment should achieve something that wouldn’t have happened otherwise. Some felt this was too high a bar, especially for institutional capital that needs to scale.
Instead, contribution may be a more practical framing. According to some participants, the Global Impact Investing Network (GIIN) now emphasises contribution over additionality, recognising that scalable, market-rate investments still play a meaningful role.
But nuance is key. As one comment noted: “Contribution is critical for scale, whereas additionality is a higher bar for more acute but narrow strategies.”
What’s next?
Ultimately, the session challenged the idea that impact investing is a settled concept. Instead, it may be time to admit that the current system in Australia is not working as hoped.
The path forward may involve redefining expectations: embracing a broader range of strategies, finding common language, being honest about trade-offs, and engaging institutional investors with the tools they need to act, not just the passion to care.
As one audience member summed up, the real question may not be whether impact can deliver commercial returns at scale, but whether only doing impact in this way will ever be enough.
This story is part of an ongoing series curated by Impact Investing Australia (IIA) designed to explore impact investing and related concepts. It was developed with research and writing support from AI.
IIA is growing the market for investments that deliver measurable social and environmental benefits alongside financial returns. Our vision is that every dollar invested builds a better world.
