Impact investing is seeing strong growth in-line with the broader sustainable investment sector. The latest RIAA Benchmark report shows that the impact sector recorded the strongest growth rate, increasing by 40% to $29 billion in 2020.
The result is a surge in impact strategies, and a consequent demand for impact investment services, all of which leads to a battle for talent.
Australian Impact Investments is an asset consultancy firm that’s been dedicated to impact opportunities since they were founded in 2014. This week, they brought on two new staff members to help analyse and digest the surge of new ‘impact’ strategies that are coming to market.
OnImpact spoke to Kylie Charlton, Managing Director at Aii, about the growth in both the sector and her firm, as well the challenges of finding good talent in a hot market.
The Impact Boom is Spreading Wider
‘Impact’ is the word on everybody’s lips, and for established firms, who have observed and nurtured the industry through this growth, there are opportunities, but also challenges, in handling a new set of clients.
“That RIAA report is definitely on the mark in terms of client feedback, and I think there’s two levels of the conversation that’s occurring. One is with existing clients, who are now wanting to go deeper and broader in their impact strategies. Our firm has traditionally been very much focused on private market strategies. But we do look at listed equity strategies as well, which is part of the work we’ve done for our founding shareholder for many, many years now.” Kylie Charlton says.
“Clients want to go broader, often they want to go beyond private markets and look at the values alignment of their entire portfolio.”
“Then you have new clients coming in as well. I think it’s very hard for people to be having a conversation today, about deploying capital at scale, without asking themselves, what is the impact of that capital? Not only charitable trusts and foundation where impact is core to their mission, but also private investors more broadly are questioning alignment with their values?”
“My broad observation, from just general conversation in the market, is that impact investing is of more interest to more people than it has ever been. This is reflected in two major mandates that we took on last year with ANZ Private Bank and Crestone Wealth Management. It shows the broadening of the client base, and this widening set of different types of investors demanding impact.”
“These mandates sit alongside that with Koda Capital, a client we have been working with since 2018,. and also our founding shareholder, Ethinvest.”
It’s a Tight Jobs Market
As the sector grows, it seems the number of deals and strategies is finally catching up with demand. For Aii, it’s as much about staying on top of the new product offerings, as it is servicing new clients.
This week Aii announced two new hires: Hugh Driver has been taken on as an Associate Director after spending 15 years at Macquarie, and before that he worked in law for Mallesons.
Andy Du Pont will also join the team as an analyst, he was previously Community and Partnerships Manager at Impact Asia Pacific (which is the publisher of OnImpact). He’s a recent graduate from University of Sydney and he’s well known to the impact community through his tireless commitment to the cause.
“We’re really excited to be expanding the team. It is about increased demand, but just as important is that there’s an increase in product set as well. A lot of people will come to this market and bemoan a lack of product, saying there’s not enough product in which to invest in. We’re in the fortunate position that most product with an impact thesis comes across our desk, so we need more staff to analyse the increased opportunity set. So, it’s not just about servicing more clients as demand grows, it’s about uncovering the best impact products available, and being able to also look into bespoke opportunities for our clients as well.” Kylie says.
“Earlier this year, we directed clients into a deal which was a loan for an independent startup school in South Australia. And for us to be able to manage such a bespoke deal, and what I would say is at the pointy end of impact, it takes time. We want to ensure we have capacity to be able to do that.”
“We actually advertised for three roles, and we opted to fill the senior and junior roles only, we didn’t find a good fit for the mid-level role which was much more akin to a traditional ESG analyst role. So yes, it’s a very tight market for talent right now. A lot of our peers in the market whom we talked to are observing the same, there’s a lot of people either shifting roles or getting promoted within roles. Talent is also increasingly expensive.”
“There is also lot of interest in impact coming from talent outside the sector. And I think that’s really interesting to see, and exciting to see as well, because we’re seeing people with really strong experience, yes, it might be in traditional markets, but bringing their own perspective and experience into this world of impact. That is really positive in my mind as people are realising it’s a sector on the ascendence and are looking for opportunities to get in.”
Finding Those With Impact DNA
The finance industry has long been a competitive industry that rewards a narrow set of highly quantitative skills. In the impact sector, the skillset needs to be wider. It demands a well-rounded personality, who’s comfortable in the grey, and who can analyse opportunities through the lens of compassion, as much as the financials.
“Of course, we are looking for those with experience. Deep experience in investment assessment, manager analysis, due diligence, the finance side of it, but also what I would call ‘Impact DNA’ within a person.” Kylie says.
“We’re trying to actually understand what drives them, and where their interests lie. And so for us, it’s actually been about finding the right people, who have the investment analysis skills, and a real commitment and willingness to align on the impact side. That’s the really important thing, because people who are committed will then dig deep to learn and understand the intricacies of the impact thesis.”
“We need to know how to analyse it, and we need to know where to reach the experts to ensure that our due diligence is thorough. But, we don’t necessarily need the climate expert, the disability expert, or the waste management experts sitting within the team.”
“We ask candidates questions around what they really care about, but also, trying to establish if they have a broad understanding and knowledge about a range of impact issues. That indicates there’s a level of intellectual curiosity, and a commitment to exploring questions around what is the problem we are trying to solve, what are the solutions to the problem, and what is the best capital to match to the problem and solution?. And that’s how we test for that Impact DNA.”
“I have been really surprised at how many really great jobs have been advertised over the last six months. It’s exciting, and it’s reflective of where the interest is, and where the industry is going.”
Disclaimer: While Andy Du Pont did previously work at Impact Asia Pacific (the publisher of OnImpact) the author did not know Du Pont was to be named in the role before arranging the interview.