If 2020 proved the resilience and importance of impact investing, then 2021 showed how much opportunity there is going forward.
As a pandemic swept the world, the doubters (who had suggested impact investing was a fair-weather trend) were silenced. Not only did the sector thrive, but it proved that we need a focus on impact more than ever, as climate change impacts grow more extreme, and the wedge of inequality threatens to further fracture our society.
The mission of OnImpact is to bring awareness to these issues, and to build a community of change-makers around it. We’ve been blown away by the support we’ve received, and it’s given us renewed energy and momentum to continue the mission into 2022.
At this juncture, as we look forward to the holidays, we want to look back at some of the major stories of the year, while also hearing from some of the leading voices in Australia about their forecasts for the biggest impact investment opportunities going into 2022.
COP 26 and Carbon Credits
The UN’s annual high-level climate meeting, COP 26, was by far the biggest news event of the year for the sector. It was a grand talk-fest, but if we want genuine change, it starts with talk.
One key point that was discussed at length was carbon credits and their role in decarbonising our world.
In November we spoke to Rich Gilmore from Carbon Growth Partners about his firm’s strategy to leverage the huge supply shortage of carbon credits, but also his views on how the talks in Glasgow tangibly impacted the sector.
Prior to that we spoke to John Connor from the Carbon Market Institute about the strong support his members had expressed for an economy-wide zero net emissions target by 2050. This was prior to the Morrison government’s endorsement of a net-zero target, and highlights the secondary effects of the COP 26 event, in pressuring world-leaders to act.
Big Fund Launches Supporting Institutional Adoption of Impact
Long-time impact pioneer Danny Almagor announced the addition of a new impact investment and impact management firm called Sentient. It would sit alongside Impact Investment Group, with a broad remit to invest but also to help grow and nurture other impact firms who seek greater scale.
The approach represents the coming-of-age of impact investing in Australia. For a country with a small population our financial services industry is huge and globally influential, due partly to our superannuation system, but also to our rich resources endowment.
The discussion of super funds engaging with impact has now turned from talk to action, and the fund managers and the intermediaries are taking notice.
For Purpose Investment Partners is building a dedicated social impact investment fund with hopes to attract large-scale private capital and accelerate social impact investing in Australia.
While the storied impact pioneer from London, Bridges Fund Management, is launching a local office, led by Sally McCutcheon and Sabina Curatolo.
Federal Government Launches EMIIF
It was announced at the Impact Summit back in 2017 by then Foreign Minister Julie Bishop, that the Federal Government was developing a fund-of-fund structure to support the development of social enterprises and local financial services in Asia, Southeast Asia and the Pacific.
It took me until 2021 to get the interview, but I finally managed to sit down with the project fund manager, Sorona from Canada, to discuss the goals, the assets and the impact a government can have as an investor.
Evolution of Foundations as Impact Investors
The Paul Ramsay Foundation (PRF) is not only Australia’s largest grant-giving foundation, it’s also a leading impact investor. The foundation is very young, launched in 2006, but that affords the organisation a nimbleness and flexibility that other more established foundations lack.
Managed by Abhilash Mudalier, the PRF has built a unique portfolio of impact investments that both provide returns to fund to the foundation’s grant-giving, but at the same time, the investments themselves contribute to the foundation’s core mission.
Abhilash explained their aspirations towards having an impact investment allocation of 10% of the Foundation’s corpus, which would represent $300 million in investment capital, allocated to impact.
In a more recent story, the challenges facing foundation’s, to align their investments with their mission, were explored further by Simon Lewis from GoodWolf. He and his team are working with trustees to understand the state-of-play, and to help them redesign their mandates, to include impact.
Looking to the Future
That’s the past, but to get an insight into the future, we reached out to some of those who were featured in OnImpact this year, to offer their predictions for the biggest opportunities for 2022.
It’s estimated that about $3 trillion a year of investments aligned with the SDGs would make substantial progress in solving the world’s many problems. This is about 1% of the world’s $300 trillion in privately held wealth.
It’s not inconceivable to be able to utilise a fraction of that private sector wealth and advance sustainable development, which invests in ways that both produce significant returns and have positive impacts upon our global future in line with the SDGs.
With the mainstream investment community entering into the impact space such as BlackRock, Goldman Sachs, Bain Capital and TCG, the biggest opportunity for 2022 and beyond will be about which is the “biggest problem” you want to tackle and that will be the biggest opportunity!
To me, it’s the opportunity to bring new methods for decarbonisation to local (ERF) and international (VERRA, GoldStandard) standard setters.
Establishing a verifiable baseline, and then tracking the reduction in key industrial processes will be spurred on by a buoyant carbon price.
In Australia, the biggest opportunity will be the Federal election. I remember Richard Denniss from The Australia Institute challenging the room at the last Impact Investment Summit on the need for the impact investment sector to not stand on the sidelines, because who was in government and what they did is 100% material to the impact the sector aims to achieve and he was 100% correct. The last 2 years have made that even more clear.
The biggest impact opportunity will be the matching of an accelerating investor appetite for high social and environmental impact investments, with integrity, to products that can generate market-rate financial returns.