David Hetherington has strong pedigree in leading and growing mission focussed organisations, he will be taking over from Sally McCutchan as CEO of Impact Investing Australia (IIA), and his experience will be vital in continuing to drive the momentum of the sector.  

OnImpact spoke with David about the priorities he will focus on for the start of the year, the importance of engaging more institutional investors with impact investing (and why it’s so challenging) while also digging a little deeper into his career thus far. 

An Impact Pedigree

For the last 15 years or so, David has been building mission led nonprofit organisations. He started out as a strategy consultant, but soon realised he wanted more from life. 

“I decided that consulting wasn’t everything I wanted to do forever.  And I had a particular interest in public policy.  And so I went off to London school of economics, and I did an MPA and Master’s in Public Administration.”

He worked for a UK think tank called IPPR, the Institute of Public Policy Research, and as he started to get homesick for Australia, he recognised that the think tank landscape downunder was pretty thin. 

He partnered with some like-minded entrepreneurs, and they launched a new consultancy, called Per Capita. 

“I was the founding Executive Director, and I spent 10 years building per capita, and leading it. We worked in a wide-spectrum of policy areas, a lot around tax and fiscal policy, education, employment, decision, disability, housing, on the whole I really, really enjoyed it.” David says. 

After a decade he felt it was time for a new challenge, and he took a role as a CEO of the Public Education Foundation. It was deep in the nonprofit space, delivering social change on the ground. 

But from there, he was lured to work with the opportunity to drive capital towards impact opportunities. 

“I had known some of the board of IIA and previous engagements, and they were looking for some strategy support around the next steps of the organisation. Later on, when they went to market to look for a new CEO, I put my hand up.” David says. 

Priority Focus Areas for IIA

Australia has a new government, an ambitious climate target, and a social sector in desperate need of fresh capital. This represents a tail-wind for IIA, a non-profit organisation with a purpose that states it’s; ‘dedicated to accelerating the growth of impact investing in Australia and participating in international efforts to grow the market globally.’

David explained the two key focus areas for him and the team are around policy advocacy work, and building the impact market.

“First is the policy advocacy task. The members of the Social Impact Investment Task Force members are now part of the IIA board, and they have reviewed and updated their work from the 2020 taskforce report and provided that to the Prime Minister. Now, the work is to be making the case in the policy community, and in the public debate where appropriate, for policy action on impact investment.” David says.

“I think there is a recognition with the fiscal pressures on government, I think there is a recognition within government that this is timely, and that in fact, this is needed, because COVID simply exacerbated the fiscal pressures that were building on the Commonwealth. And if impact investment can play a role in harnessing private capital, to develop innovative solutions, and to provide additional sources of funding to respond to important social, environmental, cultural challenges, then it’s something we all want to see happen.”

The impact sector has seen strong growth over the last decade, but there are still plenty of myths that need to be busted. Beyond that, there’s a need for sophisticated advice and modeling of opportunities to drive deeper engagement. 

“That policy advocacy work involves providing new analysis and information as needed. It’s educating decision-makers around what is an impact investing wholesaler? And what might an early stage social enterprise foundation look like?” David says.

“These are all important steps in building confidence in some of these mechanisms, and this infrastructure and, and bringing both government and the wider community along the way.”

A New Government and A New World of Positive Capitalism

The second task that David and IIA will focus on is to continue ‘market building’. This will be helped along by the growing wave of change in our economy, for business to lead with purpose, and for negative externalities to be internalised. Recognising of course that the impact sector helped to drive this momentum.

“We’re continuing our market building work. Particularly with a focus on educating the investor community and helping the investor community build confidence and understanding of impact pathways, impact measurement, and the role of impact, as a newly emerging asset class.” David says. 

“There are many actors who are needed for this market work, and I feel that Australia already has a healthy and vibrant social enterprise space. With really good representation through peak bodies, I think a role that IIA can be playing is working to inform and support and build awareness in the investor community.”

The finance community has historically led the way on impact, sometimes in support of government policies, but often in spite of them. David is optimisted the new policy pathways being laid out by the Albanese government will support the sector. 

“One of the healthy signs is that I feel this new federal government has shown a lot more policy energy in its first nine months, and that the interest shown in the impact investment space is really encouraging.” David says. 

“And I think we’re coming to the end of a long period where frankly, neoliberalism was the dominant paradigm for markets and for government. We need to find ways of harnessing capital that aren’t just about maximising return with no regard to the externalities. With no regard to the spillover effects, whether positive or negative. I think most people are coming around to the idea now that do no harm is a pretty good first principle and investing.”

The Importance of Engaging Institutional Investors

Having identified the goals, the next step is to plan the work to get there. David recognises the hard work that’s been done over the past decade, by leaders like Sally McCutchan and  Rosemary Addis, and he’ll continue the mission of getting institutional investors like super funds to embrace impact. 

“Fundamentally, we want to connect institutional capital to impact opportunities.” David says. 

“There’s a gap at the moment in Australia, where there’s lots of social enterprises doing really impressive work, but scaling that to a point where it is a viable investment opportunity for our super funds, our fund managers, and their wealth managers, is not something we’ve achieved yet.”

It’s a big challenge, but the effort is worth the reward. 

“Building that pathway or building that pipeline, such that we can connect this enormous pool of superannuation capital to the enterprises who are looking to deliver impact, that’s going to unlock a new wave of impact.” David says.

“It’s not straightforward, because that gap exists for a reason. It’s big because there isn’t a pipeline of significant deal size yet that allows the super funds to look at impact opportunities. Climate is probably the area where those two things are already meeting. But some of the other impact areas, employment for vulnerable groups for example, is harder for the big funds to stack up. And we want to see both the scaling of those other enterprises, and the awareness and confidence of the institutional investors grow, so that those two can connect.”

The Promise of on An ‘Impact Wholesaler’

There’s been plenty of debate in the sector, and in years past there were hopes the major report by the Social Impact Taskforce would be the catalyst for the government to recognise the opportunity, and support the creation of an impact investing wholesaler; as the taskforce recommended. 

The previous government didn’t release the report, and the opportunity ran the risk of withering on the vine. But now there’s hope it can be revived. 

“The first step is an impact investing wholesaler. Mechanically, that is the piece of infrastructure that is going to allow larger investors to size up opportunities to co-invest on opportunities, to have some confidence that there is a framework for backing impact opportunities and for spreading the risk, across multiple investors interested in the space.” David says.

“If we can get a wholesaler up in Australia, then I think the very act will encourage or incentivize people; investors, institutional investors to explore it in the depth it deserves. From there, we hope to see more impact funds pop up, like we have in the last couple of years, and you’ll see more entrepreneurs coming in because they can anticipate that there is a pathway to scale.”

There is a benefit from having waited so long to create a wholesaler; Australia can benefit from the examples that have been tried and tested overseas. Big Society Cpaital is the msot well  known example, in the UK, and the local sector has strong linkages to these global leaders. 

“That model has been thought about, honed, and teste elsewhere. And we know it is a critical step along the pathway to accessing larger pools of capital accessing institutional investment.” David says. 

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