OVERVIEW OF IMPACT

INVESTING
in Aotearoa
 N O V E M B E R 2020

Part I: What is impact investing?

Part II: The impact investing landscape
in Aotearoa and the world
Part III: Case studies
Part IV: Resources

This has been a collaborative project coordinated by Steven Moe and the Centre for Social Impact,

with invaluable contributions from

 Introduction

IMPACT
The COVID-19 pandemic has disrupted our old ways of doing
things and provided an opportunity to embrace new, more

INVESTING
regenerative approaches. Impact investing is one of those
areas where there is increasing interest. There is a real desire to
understand how it is different from traditional ways of thinking

in Aotearoa about investing, and what its potential is for Aotearoa.

Increasingly, investors are looking at the low returns from
traditional investments and asking if they could have far bigger
impacts from their investments beyond financial returns –
actually using investing as a force for good. The scale of the
social and environmental problems that we are facing today will
require more than access to our traditional funding pathways.
COVID-19 has amplified social inequality and the impacts of
climate change, creating a driver to build back better. Impact
investing is one tool we can use to do that – let’s explore how.
In this paper we break down the essential ingredients that set
impact investment apart and provide an update on the current
landscape for impact investment in Aotearoa. We cover the
theory, and we back that up with some real-life examples
from some of the market leaders in this space. We look at the
challenges they have faced and what have they learnt.
Part I: What is impact investing? IMPACT INVESTING in Aotearoa | 4

Impact investing refers For example:

to investments made into
companies, organisations,
and funds with the intention • Impact first • Finance first
to generate positive social investment investment
or environmental impacts seeks to optimise social seeks to optimise
alongside financial returns.1 or environmental impact, financial returns, while
while obtaining financial obtaining social or
While impact investing returns 2 environmental impact. 2
is a small sub-set of the
investment sector, the term
still represents a broad range
of activities.
It should be noted that either type of approach can take the form of debt or equity investments.

The practice of impact investing has three core characteristics:

Intentionality Expectation of return Impact measurement

– an investor’s – an expectation that an – a strong commitment by the investee to
intention to have a investment will generate work with the investor on measuring and
positive social or a financial return reporting on the social or environmental
environmental on capital or, at performance and
impact through a minimum, the progress
1
Global Impact Investing Network
investments a return of of underlying
capital investments,
2
Growing Impact In New Zealand Impact ensuring
Investment: need, practice and opportunity
September 2017 transparency and
accountability 3
3
Impact Investment Part One: An introduction to
impact investing (2017) by the Centre for
Social Impact and the Ākina Foundation
Part I: What is impact investing? IMPACT INVESTING in Aotearoa | 5

Merging motivations FINANCIAL RETURN

The practices and motivations of

investment and philanthropy have

Market Return
traditionally been divided. These
worlds are now converging, creating an
TRADITIONAL RESPONSIBLE S U S TA I N A B L E
investment continuum. This continuum INVESTING INVESTING INVESTING
links traditional investing with traditional
philanthropy (grants) through sustainable
and responsible investment, impact I M PA C T
investment and venture philanthropy. INVESTING
These approaches differ in the degree to

Below Market
which they integrate societal and financial

Return
considerations.

VENTURE

0%
PHILANTHROPY
Negative Return

TRADITIONAL
PHILANTHROPY

From Catalyzing wealth for change, Julia IMPACT

Balandina Jaquier, 2016, Note diagram No Impact Values Alignment Values Alignment Impact Objectives
modified to increase impact investment Objective “Do No Harm” Sustainability Trends Are Key
overlap with venture philanthropy and
with sustainable investment – reflecting
the merging of activity on the continuum Impact not measurable/measured Impact measurable/measured

Figure 1: A new investment continuum2

2
Impact Investment Part One: An introduction to im- Within the term “impact investing” there is a continuum of activity. An impact investment might focus primarily on financial returns (or “finance-first” impact
pact investing (2017) by the Centre for Social Impact investments), on impact (“impact-first” mission-related investments) or a mix of both. The performance of an impact investment fund must be considered in
and the Ākina Foundation terms of the purpose for which it was designed.
Part II: The impact investing landscape in Aotearoa and the world IMPACT INVESTING in Aotearoa | 6

In Part 1 we briefly reviewed The global perspective Impact investing has wide appeal around the globe, with
what impact investing respondents to GIIN’s latest annual survey coming from 46
is from a theoretical countries. While 77% of investors had their headquarters in
perspective. But is impact developed markets, 21% of headquarters were located in
emerging markets. To further illustrate the growth in these
investing actually being
regions, South East Asia and Sub-Saharan Africa were identified
done in practice? The short
as locations for expansion, with 52% of GIIN respondents
answer is: Yes, and it is planning to grow their allocations in these regions. Common
growing. In this section we sectors for impact investment included food production and
look with a global lens at other agriculture as well as healthcare.
some initiatives overseas
before we focus on what
The Global Impact Investing
we are seeing in the New
Network (GIIN) conducted
Zealand landscape. an impact investment survey When asked about COVID-19,
recently and as a result the GIIN survey respondents
estimated the market size for indicated that global impact
impact investing as of April 2020 investors are responding
at US$715 billion. It found that flexibly, with 57% of GIIN
while the majority of the market respondents stating they
consists of small investors, were unlikely to change their
the median investor manages commitments and 15% stating
US$89 million. However, there they were likely to increase
are a small number of investors their capital commitments.
that manage significantly larger
funds. The International Finance
Corporation estimated in its
report, “Creating Impact: The
Promise of Impact Investing” In terms of how to measure impact, back in 2010 85% of
that the investor appetite for respondents to the first Annual Survey said they used their own
impact investing may be $26 measurement and management systems. In the 2020 survey,
trillion. It notes that this is a 89% of respondents said they used external impact measurement
conservative estimate. systems, with the United Nations’ Sustainable Development Goals
(UN SDGs) often being referred to (although they are not an impact-
measurement system in themselves).
Part II: The impact investing landscape in Aotearoa and the world IMPACT INVESTING in Aotearoa | 7

Some examples
from different
regions
It is helpful to consider
some detail from a few
countries, as well as that AUSTRALIA UNITED KINGDOM U N I T E D S TAT E S
high-level overview.

• Australia has seen significant • The Impact Investing Institute • The US pioneered the green-bond
growth in impact investing, with a notes that over £5 billion has been market, issuing US$34.1 billion in
particular focus on green bonds committed by impact investors 2018 alone.
and environmental investments in the UK. The UK is a pioneer in
• KKR & Co. raised US$1.3 billion
significantly outweighing social using social impact bonds.
for its first global impact fund,
investments.
• Impact investing has a wide scope with a focus on improvements
• Australia’s largest social in the UK, encompassing pension that contribute to the UN SDGs.
impact bond is COMPASS; it funds, insurers and investment
• TPG’s The Rise Fund was also
provides housing and support banks. For example, the Greater
created to support the UN SDGs,
to young people leaving care. In Manchester Pension Fund has
and currently has US$4 billion
2018-2019 it secured AU$14.2 allocated £1.05 billion to both
under management. BlackRock,
million in investment funding local and impact investments.
the world’s largest asset manager,
from individuals, families and
• In 2012 Big Society Capital launched a global impact fund
institutions.
was founded to engage in this year.
• Another exciting initiative is impact investing. Since its
Accelerate with IBA. This is a launch, investments in charities
collaboration involving Indigenous and social enterprises have
Business Australia and The almost quadrupled, reaching
Difference Incubator to provide a approximately £3.5 billion in 2018.
six-month programme supporting
indigenous entrepreneurs.
Part II: The impact investing landscape in Aotearoa and the world IMPACT INVESTING in Aotearoa | 8

The New Zealand perspective NAME WHO IS INVOLVED AND THE FOCUS

There is increasing interest in impact investing Impact Enterprise Fund This was the first impact investing fund in New Zealand. It invests in New
here in New Zealand. The case studies in Part Zealand businesses that provide tangible societal or environmental returns
III are illustrative of the fact that there are funds from their operations, alongside attractive financial returns. Organisations
active in the market that are actually investing. involved include the Ākina Foundation, New Ground Capital and Impact
This is not just an overseas development. A great Ventures.
deal of interest was shown at an impact investing
event in August 2020, where eight impact-investing Purpose Capital Impact Fund The Purpose Capital Impact Fund is a collaboration between the New
leaders shared their insights (the audio is here). The Zealand business, investment, and philanthropic sectors. Combining the
Impact Investing Network is another example of a power of the commercial with the expertise of the philanthropic, Purpose
community developing in this area. Capital brings new resources and capital to projects and organisations
working toward social and environmental solutions. The Fund is seeking to
In this section we outline some examples of impact
raise $30 million to generate meaningful impact and financial returns in its
investing funds and initiatives, of which some also
regions and across New Zealand. It has raised $20,910,000 to date.
feature as case studies in Part III. They show that
impact investing is not just a theory, it is a reality. Community Finance Community Finance focuses on social housing. It has raised $40 million for
We expect that in just a few years the list of funds The Salvation Army to build new housing. The variety of limited partners
and options for impact investors will grow. include The Tindall Foundation, the Matua Foundation, and Christian
Savings. Recently Generate KiwiSaver invested more than $20 million.

New Zealand Green Investment This Crown-owned green investment bank was established to accelerate
Tikanga-led Impact investment
Finance low-emissions investment in New Zealand, with an initial $100 million fund.
One thing that makes Aotearoa unique is the perspective
that we can draw from Te Ao Māori. The Connective, an Soul Capital Soul Capital invests in companies whose purpose is to tackle societal or
impact-first company that collaborates with investors,
funders and local and indigenous communities to design environmental problems head-on with innovation and scalable business
systemic investment programmes and projects, has models.
recently released four guides. The guides are designed
to share some of the learnings from the collaboration
Te Pai Roa Tika O Te Taitokerau, a tikanga-led impact
Te Puna Hapori Trust Waikato is a fund sponsor of Te Puna Hapori, which is a blended
investment platform (see finance fund that focuses on enabling small towns and provinces across
the case study by The the country to thrive. It is targeting NZ OCR+3-4% net IRR with semi-annual
Tindall Foundation in Part
III, which discusses Te Pai distributions. It will provide flexible debt funding solutions to community
Roa Tika). We encourage organisations.
you to check out this
valuable resource at ACC’s Impact Investment Fund This $50 million fund focuses on companies that are making positive
this link.
differences to the health, safety and wellbeing of New Zealand.
Part III: Case studies IMPACT INVESTING in Aotearoa | 9

We wanted to make this part practical, with an “on the ground” view of some of the leading local impact investors.
To do that we conducted interviews and received information from:

CASE STUDY 1: New Zealand Green Investment Finance

Jenny Lackey, Head of Communications and Government Relations
INSIGHTS/LESSONS FROM ENGAGING
WHO FOCUS A RECENT INVESTMENT
IN IMPACT INVESTING

New Zealand Green Investment Finance is Our four key objectives are: CentrePort There is a growing interest among financial
a green investment bank established by the markets in sustainable finance that can help
1. Invest to reduce emissions We announced our first investment decision
Crown to accelerate investment that reduces New Zealand meet its low-carbon-future
greenhouse gas emissions in New Zealand. 2. Invest on a commercial basis on 18 June 2020, providing a $15 million aspirations. We look forward to working with
3. Crowd-in private capital green credit facility to Wellington port a range of market participants to deliver good
We are an independent limited liability CentrePort to be used to finance low-carbon economic and environmental outcomes, hand
company, set up with initial capital of $100 4. Market leadership and demonstration initiatives. in hand.
million. We focus our efforts on investments in the
following sectors: The green credit facility provided by New There are many ways to tell the story of
We deploy capital with other investors Zealand Green Investment Finance will impact, and it can be beneficial to understand
on a commercial basis, in companies • Transport be used exclusively to fund low-carbon and maintain flexibility in the ways you opt
and projects that accelerate emission projects that will reduce CentrePort’s overall
• Process heat to measure or account for carbon. You can
reductions. With a broad mandate and ability carbon footprint, such as the introduction of
• Energy efficiency tell great stories about system enablers or
to invest flexibly, we can invest across the electric vehicles, on-site renewable energy wider low-carbon transition opportunities
capital structure, execute transactions and • Agriculture generation and energy-efficient upgrades. using a range of measurement types and
mitigate risks for our partners. • Distributed energy resources
Successful investments in electrification, case studies. We think that over time the
We make independent investment decisions, At present we exclude the following sectors: renewables and efficiency will not only frameworks for measuring climate impacts
informed by a board and a senior executive large-scale renewable electricity generation, assist the port to achieve its climate goals will be driven by, and respond to, the needs of
team with expertise in investment, financial forestry interventions, state sector and reduce the region’s carbon footprint, but investors.
markets and sustainability. investment and carbon capture and storage. also provide an example for other firms in
the port sector and beyond.
This investment from New Zealand Green
Investment Finance was the first in a series
of investments planned for 2020, which can
now be found at our website
www.nzgif.co.nz.
Part III: Case studies IMPACT INVESTING in Aotearoa | 10

CASE STUDY 2: Foundation North

Eve Jolly, Innovation Catalyst
WHO FOCUS A RECENT INVESTMENT LESSONS

Foundation North is the community trust for We are undertaking impact investment The Foundation has invested $2m into The We are excited about the potential for
Auckland and Northland. We hold in trust to support our mission across three Salvation Army Community Bond, managed our capital to support our communities in
for these communities an endowment, or focus areas of our strategy: increased by Community Finance. This provides Auckland & Northland. We are also excited
putea, of over a billion dollars. This allows equity; social inclusion; and regenerative finance to The Salvation Army, an existing about working with our communities to
us to make millions of dollars in grants each environment. Impact investment is another grantee of the Foundation, to build three create and build deals that work for them, and
year to groups across the region. Foundation tool alongside grants to support our social housing developments in Royal Oak, ensure that finance is shaped to respond to
North has an impact investment asset communities. The nature, size and scale of Westgate and Flatbush. This will support our shared objectives, not just the investors’.
allocation in its total portfolio of around social and environmental challenges and 120 families into safe, warm and secure There is comparatively less of a market in
$28m. opportunities means it is important for a housing. some of our impact areas so this will take
range of approaches, financial instruments time and partnerships. Deals are created not
and stakeholders to work together. just found.
Beyond individual deals, we have learned
that building the regional impact investment
market is necessary for the effective
deployment of capital over the longer-term.
We are establishing a fund, building the
pipeline of deals, sharing our learning and
supporting market infrastructure.
Impact investment is not just about the
capital: it is about relationships, collaboration,
patience. We need to think – and act – long
term.
Part III: Case studies IMPACT INVESTING in Aotearoa | 11

CASE STUDY 3: Community Finance

Paul Gilberd, General Manager
INSIGHTS/LESSONS FROM ENGAGING
WHO FOCUS A RECENT INVESTMENT
IN IMPACT INVESTING

Community Finance is a social enterprise Our focus is on getting low-cost finance The first investment is directly targeting the The impact investment market in New
owned by a group of charitable trusts. We to proven solution providers on terms that New Zealand housing crisis by providing Zealand is immature but developing rapidly
operate as a finance company that helps work for them. In most cases this means low-cost construction finance to registered as investors become more conscious of the
match ethical money with positive social providing low-cost construction finance charitable community housing providers power they have with the choices they make.
and environmental projects. We do this as debt, with low establishment fees and at rates and on terms that work. The main We are seeing a grassroots, consumer-led
by using well established financial tools on reasonable security terms. We focus investment achievement to date was the tide change as people decide to make their
such as loans and social bonds, but we do on providing investors with security and provision of $40 million of construction money work harder for them in favour of
it in different ways to maximise the good confidence that not only will they get fair finance to The Salvation Army to build 118 environmental and social impacts. We are
outcomes for investors and the projects that financial and impact returns on investment, new homes for homeless Aucklanders. As at seeing growing interest from investors who
are delivering the impact and outcomes – but at the end of the term they will get their the end of October 2020 this bond offer had want to know what their money is being
building better, more resilient communities money back. closed two months ahead of schedule and invested in and that it is doing good. Negative
and enhancing the environment. was oversubscribed. Work on new regional screening has become a bottom line, not
community bonds is well advanced. a value-add. People want to be part of the
solutions to the problems they see before
them, not part of the problems.
Part III: Case studies IMPACT INVESTING in Aotearoa | 12

CASE STUDY 4: The Tindall Foundation

John McCarthy, Manager
WHO A RECENT INVESTMENT INSIGHTS/LESSONS FROM ENGAGING IN IMPACT INVESTING

We are the Tindall Foundation. Apart from the impact investment funds we have to use the resources they had to create employment Part of the impact is to leverage other finance (as shown by
Our statement of investment invested in (Impact Enterprise Fund , Purpose Capital, and income-generating opportunities for their the example above), which helps groups to access even more.
policy and objectives allows us and Community Finance), here are two examples. whānau.
to invest a certain portion of the We find more innovation from those who have accessed
cash reserves in impact investing.
The housing area: The New Zealand Housing Following that initial meeting, and because traditional impact investing – we often collaborate to help get the new
Foundation has had development finance provided finance was hard to access, the iwi leaders wanted ideas into investible products (and then we invest in them). So
Around $12 million is in impact
to it (about $2 million donated initially and about to talk about impact investing and how that might philanthropic investors can help groups to innovate in ways
investing now, with about $10
$10-12 million of investment since then) to start and support them to achieve the aspirations outlined in that they are not able to with mainstream finance.
million also donated each year.
continue building affordable housing for low-income their plan . This is where we saw an opportunity to act
families. That finance has also allowed the Housing The importance of bringing with you intermediaries to walk
as a catalyst: we agreed to support them by paying for
Foundation to leverage it to access bank finance of with you on the journey (such as lawyers, accountants and
FOCUS an external consultant to work with Amokura’s Chief
more than $350 million. The tangible outcomes include other advisors). Finding the right intermediaries is important.
Executive to help develop a model for bringing forward
Our trustees saw the opportunity that in the past 15 years it has built more than 750 They learn as you learn – not everyone knows about the
investment opportunities. This had to be Māori-owned
provided by the use of the houses, and more than 400 families are now in its options.
and -led and underpinned by a tikanga framework.
Foundation’s balance sheet about shared ownership programme. More than 120 families The start of these things should always be about the
20 years ago (before it was called Now an overarching charitable trust (Oati Pai
who have been through the Housing Foundation’s relationships – not the money. What are you trying to achieve
impact investing). Our focus has Charitable Trust) has been set up. It is the full owner
programme now fully own their own homes. together? Then more broadly considering how to make it
supported both individual initiatives that governs two entities – a project development
But the impact is beyond the housing; there are flow- happen. The basis is relationship first. We stay much more
and enterprises through investment, company and a capital fund. The project development
on effects for the families through education stability involved and connected with those we have invested in
but we also want to be a catalyst company supports the development of a pipeline
and an ability to save money and grow assets. And compared to the relationships in most grants and donations. An
to help build the market itself for of investment opportunities in areas like forestry,
community stability is created as well, with large- investment relationship can be very rewarding.
impact investments. To do this we housing, digital, energy and aquaculture projects
are often the first investor in new scale housing developments that have wrap-around (and other initiatives). Then funds are raised through Let’s also bust two common myths:
initiatives to help support those new support and community development work. the capital fund – they could be from philanthropic
models and encourage innovation, investors, private investors, iwi investors or others – That there is nothing to invest in – there is. Even for the more
Te Pai Roa Tika: We have wanted to help out to get them underway and delivered. cautious investor, why not look at the funds emerging? Those
as that then helps build out the in Northland for a long time – the Foundation has
diversity of products and services include Purpose Capital, the Impact Enterprise Fund and Soul
provided many grants over the years, but we felt we So our role has been to help fund the work done by Capital, as well as Te Puna Hapori (the new Trust Waikato
in the area of impact investing. had not achieved very much in helping to transform the external consultant and the consortium Chief
So we view our role as a market infrastructure fund). While we have done some things on our
or turn around the challenges faced by the region. Executive to develop the structure. Also, The Tindall own, it is often a better option to do this with others – especially
builder. Allied with that has been In late 2017 we met with Amokura, a consortium of Foundation Manager has a temporary role in the
our work with others such as the if you are just starting out on the impact investment journey.
seven Taitokerau iwi chief executives, to introduce establishment governance until additional local iwi
Ākina Foundation and its Impact ourselves. That initial conversation led to talks about governance is appointed. So this is an alternative That impact investing doesn’t pay the way or produce a
Investment Readiness Grants to the economic development plan they had written, to The Tindall Foundation only funding through proper return – that is not the case. Across the world it often
help build a pipeline of investable (He Tangata, He Whenua, He Oranga) which showed grants and donations – considering opportunities of matches other investment options. And as cash returns from
opportunities and also support the the Māori economy in Taitokerau was a developing investing through its balance sheet into a region to other investments reduce in the current economic climate, a
good they will do in turn. economy within a developed economy. They wanted help iwi/Māori deliver their own long-term aspirations. financial return plus the extra impact can look very attractive.
Part IV: Resources IMPACT INVESTING in Aotearoa | 13

A selection of useful
articles , resources and “An impact investing panel discussion held recently, with eight experts sharing their views on a seeds podcast. The panellists were David
websites on Impact Woods (New Zealand Green Investment Finance Deputy Chair and former Chair of the Impact Enterprise Fund), Rangimarie Price (The
Investment Connective), Louise Aitken (the Ākina Foundation and Impact Investing National Advisory Board member), Rebecca Mills (founder of The
Lever Room and author of the “Build Back Better” report), Liam Sheridan (Foundation North Chief Financial Officer), Pip Best (EY Oceania
Climate Change and Sustainability Services Director/The Aotearoa Circle), James Palmer (Community Finance Chief Executive), and Mark
Ingram (Brightlight Chief Impact Officer – Australia).

“A Short Guide to The Aotearoa “Creating Impact Global Impact New Zealand
Impact Investing” Circle’s Sustainable – The Promise of Investing Network Green
– by The Case Foundation. Finance Forum Impact Investing” Annual Impact Investor Investment
International Finance Corporation. Survey results. Finance

“Impact Investment to Deliver Social Impact Investing “Impact Investing Handbook:

or Environmental Benefits” Network. Aotearoa An Implementation Guide for
– This two-part report commissioned by Foundation North, New Zealand Practitioners”,
from the Centre for Social Impact and the Ākina Foundation, This network is designed to connect – by Rockefeller Philanthropy Advisors – A practical
looks at how impact investment could help the Foundation, people through discussion and publication that features case studies and detailed guidance
other philanthropic funders and investors to achieve both resources about Impact Investing to for individuals, families, foundations and corporations.
financial returns and measurable, beneficial social or share, educate, raise awareness and funders and investors to achieve both financial returns and
environmental impacts. inspire. measurable, beneficial social or environmental impacts.

“Responsible Investment “Roles Foundations “Social Enterprises “Tikanga-led Impact

Benchmark Report 2020 Play in Shaping in New Zealand: Investment”
New Zealand” Impact Investing”, A Legal Handbook” – A series of four guides designed by The
– by KPMG at the request of the – by David Wood, “Stanford – by Steven Moe Connective to share some learnings from the
Responsible Investment Association Social Innovation Review”. collaboration Te Pai Roa Tika O Te Taitokerau, a
Australasia. tikanga-led impact investment platform.
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Centre for Social Impact
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[email protected]
Published November 2020 by the Centre for Social Impact (a Foundation North initiative).
www.centreforsocialimpact.org.nz