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In 2009 the Monitor Institute released a report on catalysing the emerging social impact investment market. Their view was that “…impact investors want to move beyond “socially responsible investment,” which focuses primarily on avoiding investments in “harmful” companies or encouraging improved corporate practices related to the environment, social performance, or governance. Instead, they actively seek to place capital in businesses and funds that can provide solutions at a scale that purely philanthropic interventions usually cannot reach. This capital may be in a range of forms including equity, debt, working capital lines of credit, and loan guarantees.”^
In December 2010 the Commonwealth Government launched the $20M Social Enterprise Development and Investment Funds initiative (SEDIF). It was the Government’s stated intention to “catalyse” the emerging social impact investment market in Australia.
Three of the key premises of the initiative was that a “fund manager” be identified to prudently manage the investment funds, that the Government’s contribution be matched with private investment capital on a 1 to 1 basis and that the investment funds be economically sustainable into the future. The Government recognised that a key factor in ensuring success for the initiative was that it should be modelled on a commercial basis using an existing investment management framework and that it be scalable.
History will now record that the SEDIF initiative successfully introduced $32,000,000 into the social impact investment market, but it also achieved other things. The Monitor Institute report identified that to increase capital in the sector, there was a need to build efficient intermediation and enabling infrastructure for the industry.
The SEDIF initiative focussed on structure ensuring the investment capital was well managed and brought to the demand side in a stable and sustainable way. We believe the $6M investment commitment made by Christian Super in supporting SIA’s own Community Finance Fund is significant in validating the Commonwealth’s approach. Industry superannuation funds are subject to prudential regulation by the Australian Prudential Regulation Authority. They are responsible for managing the retirement savings of thousands of Australians and are held to account by long established fiduciary duties to their members. Their investment attitudes and actions consequently influence the views of other institutional and professional investors.
Will Christian Super’s commitment to social impact investment cause other institutional investors to consider their ethical investment record? Only time will tell. However if the essence of the Commonwealth’s initiative was to act as a catalyst for the development of the industry, then interested observers may reasonably regard the SEDIF initiative as a milestone step in Australia.
^ Jessica Freireich, Katherine Fulton, Investing for social and environmental impact: a design for catalysing an emerging industry, Monitor Institute, January 2009
28 October 2011
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