NZ charitable organisation trustees are slowly tuning in to the impact investment trend that has gone prime-time offshore, according to the head of the country’s largest specialist fund in the sector.
Bill Murphy, Purpose Capital Impact Fund (PCIF) executive director, said the concept was gathering ground in NZ, especially in philanthropic and charitable investing circles.
“Most trustees now have an understanding of what impact investing is but, for many, translating that into real investments can be a bridge too far,” Murphy said. “We hope to give them more confidence to make that leap.”
Last week the $20 million plus PCIF, which has attracted investments from charitable trusts such as WEL Energy Trust, BayTrust, TECT, made its first impact allocation with a $5.5 million contribution to a ‘blue water’ mussel farm project off the cost of Ōpōtiki.
Fellow local impact player, the $9 million Impact Enterprise Fund – claiming the first-to-market prize after launching in 2018 – cemented its fourth investment this April in a deal with Voltaic Electric Jets.
But the impact urge has picked up noticeably in NZ this year with Trust Waikato slating a fund for release this quarter. Fellow community trust, the $1.4 billion Foundation North is also close to appointing a manager for a new impact investment mandate of up to $15 million. It is understood the Foundation North mandate puts heavy weight on the impact side of the equation under concessionary financial return targets.
In line with offshore experience, the COVID-19 crisis does not appear to have squashed the nascent impact investing enthusiasm in NZ.
The recent Global Impact Investing Network (GINN) annual survey report, for example, found that while 80 per cent of respondents expected the pandemic to increase investment risks only 43 per cent agreed impact risks would rise.
“Most respondents indicated that they are unlikely to change the amount of capital they had planned to commit to impact investments in 2020 as a result of the COVID-19 pandemic (57%),” the GINN study says. “However, 20% are at least somewhat likely to commit less capital than they had planned; 15% are likely to commit more.”
Murphy said the Ōpōtiki mussel farm project included some strong impact provisions that investors would closely monitor.
For example, the farm expansion and construction of a new mussel-processing factory in the town, was forecast to generate up to 230 jobs.
However, he said under the terms of the investment, the factory would have to fill as many of those jobs as possible from Ōpōtiki itself, which currently has high unemployment and associated social problems.
The arrangement also includes training programs to equip locals for the work and child-care plans that should enable single-mothers to take up employment with Whakatōhea Mussels.
Outside of the social impact targets, the Whakatōhea mussel farm ticks some environmental boxes, too, Murphy said.
“The future of aquaculture is in blue-water farming,” he said. “There’s too many environmental issues with in-shore marine farms.”
Under the impact investment conditions, the Whakatōhea project also includes a “commitment to minimise the impact of operations on marine life”, according to an official release.
Originally from the US, Murphy, founder of the Enterprise Angels network in NZ, said colleagues offshore are surprised at the primary-production flavour of most impact investments here
And PCIF does have a strong pipeline of deals that fall under the land-, or sea-, based ventures label ranging from a company that recovers wax from swamp kauri to an greenhouse organic tomato firm.
“But we’re interested in social housing, too, and innovations in emissions reduction,” he said.
The impact investment firm would probably open up soon for a new round of capital-raising to bring the fund size to about $30 million.
Even including the $25 million plus ASB has accrued in its impact investment fund (which some critics argue isn’t quite true-to-label), the sector has some room for growth if NZ is to catch up to the global trend.
GINN estimates the total impact investing market at about US$715 billion worldwide.