Harbour Asset Management released its inaugural impact fund report last week as the targeted investment style gathers momentum in NZ.
Anchored around the concept of achieving measurable real-world ‘change for good’, impact investing is typically sheeted to direct ownership or project-funding but Harbour argues the case for equities as socially transformative tools.
“Listed markets are among the largest asset classes in the world,” the impact report says. “Challenges such as climate change and responsible production are too large to not consider the role of listed companies. Share market investing sends strong signals to companies about what activities are valued by society.”
The 56-page report details the first-year achievements of the Harbour Sustainable Impact Fund – a diversified portfolio of both local and global equities (using Mirova and T Rowe Price as underlying managers) as well as ‘green bonds’.
“At Harbour we believe a solely exclusionary approach, whereby some sectors are barred from investment, is not sufficient,” the report says. “The challenges described above cannot be solved by allocating away from companies, but rather by allocating towards change makers.”
While the report maps fund holdings against various metrics – including the UN Sustainable Development Goals – the Harbour report says anti-greenwashing proof-of-impact remains a work-in-progress.
“Greenwashing stains the credentials of responsible investing. In part impact investing is a response to this as it goes beyond responsible investing in its aims and requires measurement and disclosure to protect its integrity,” the report says.
“…. Data availability and quality also make [impact validation] challenging. Ideally, each impact thesis would be supported by a metric demonstrating impact: the output. This could be, for example, number of lives saved. However, often these data points are not available, and we must substitute for measuring an input.”
Registered in June 2021, the Harbour impact fund – managed by multi-asset specialist, Chris Di Leva, and senior credit analyst, Simon Pannett – officially went live in November last year just as global markets turned sour. According to Disclose data, the now $3.5 million fund has seen monthly returns range between about -6 per cent to almost 1.6 per cent for the seven months to the end of June this year. Total fees sit at 1.2 per cent.
But the impact theme is building steam across the wholesale market, in particular, with a string of recent deals including a $10 million allocation to NZ solar electricity project, Lodestone Energy, engineered by Purpose Capital last week.
The local impact fund, launched in 2019, contributed $2 million of its own money with associated Purpose investors along with Trust Horizon and Tauhara North No2 Trust making up the difference.
“By leading investment opportunities, we provide confidence to other investors to invest alongside us in impactful companies and projects,” a Purpose release says.
Other recent impact deals include a $37 million NZ social housing bond offer by the Australian manager Brightlight earlier in October with more likely in the pipeline.
The recent Responsible Investment Association of Australasia (RIAA) NZ annual report also showcases the rapid growth of impact opportunities in the country during 2021 – albeit from a low base.
According to the RIAA report, total NZ impact assets under management “ increased to $8 billion in 2021 compared to $3 billion in 2020”.
“By value, impact investing is primarily made up of green, climate or social impact bonds (96% or $7.7 billion), according to data sourced through desktop research,” the RIAA study says, in a universe covering “11 trusts, foundations, funds or impact investors domiciled in Aotearoa New Zealand”.