Our expectations of companies, governments and other institutions are changing. A recent Trust in the Workplace survey highlights that about 69 percent of employees rank societal impact as a strong expectation or a deal breaker when considering a job, 63 percent of consumers buy or advocate for brands based on their beliefs and values and CEOs are expected to act on issues such as the treatment of employees, climate change, discrimination or the wealth gap.
Changing expectations
Society’s expectations around these issues are driving companies to be transparent about what they stand for and to take accountability for their activities. There is increasing government attention to policy and regulation to address these issues. The world has coalesced around the need to achieve the United Nations Sustainable Development Goals (UNSDGs) with an estimated financing gap of US$2.5-3 trillion per year, in developing countries alone.
Against this backdrop, new and innovative opportunities have emerged for investors to invest in companies that “do good”, mitigate their negative footprint and create a positive impact for people and planet.
This focus on impact is core to our mission at Breakthrough Victoria. We are investing in innovation and technology responsibly. We are seeking to deliver not only financial returns, but environmental and social impacts for Victoria.
Mainstreaming impact investing: starting with values
A growing group of investors exists in Australia who share Breakthrough Victoria’s aspirations to mainstream investing with impact. This was evident at the Impact Investment Summit in Sydney earlier this year, where leading Australian impact investors, startups and collaborators gathered to share and learn best practises in the field.
This included a session with Sir Ronald Cohen , known as the ‘father of British venture capital and social investment’. It focussed on the state of impact investing and the three forces shifting economic systems globally: i) changes in values of consumers and talent; ii) leaps in technology and changes to business models; and iii) the need for transparency and mandatory disclosures on climate and sustainability. The latter is seeing organisations such as ASIC issue guidance on avoiding “greenwashing” .
Our Executive Director, Portfolio Management, Sally McCutchan , chaired an insightful session on ‘Values Aligned Portfolio Building’. It highlighted the importance of identifying the areas of impact that are important to you as an investor and then building deep knowledge on the markets and sectors where this impact can be realised. It also discussed the importance of influencing impact outcomes at scale by engaging and advocating to companies and fund managers around issues that matter. An example is the 40:40 vision established by some of Australia’s largest superannuation companies, which focuses on improving diversity outcomes in mainstream investment.
Humbition: ambitious goals and humility to tackle the pressing challenges of our time
No, it’s not a typo. Humbition was the word of the summit and one that I hope to see spread along with impact investing. Introduced by leaders in impact investing, Jed Emerson and Rosemary Addis , humbition is the importance of having ambitious goals and humility as a means to deal with challenges like climate change. Time is limited and an entrepreneurial mindset is needed to try ideas, learn and iterate in favour of being “directly correct versus precisely wrong”. This is particularly important in complex areas such as creating systems change in ESG and measuring and managing impact.
Shaping our own impact framework
So, it’s with humbition that Breakthrough Victoria is working to formalise our own practice on responsible and then impact investing. We are developing our thinking using the Impact Investing Australia Roadmap and learning from experts within our own team as well as others, like those at the Impact Investment Summit. This is an ambitious and exciting journey Breakthrough Victoria is taking towards impact creation and will only be possible with the help of our values aligned employees, investee companies, shareholders, partners and collaborators.
In the words of Sir Ronald Cohen, “Onwards and Upwards!”.
What is impact investing?
Impact investments are investments made into companies and funds with the intention to generate positive, measurable social and environmental impact alongside a financial return.
Responsible investment involves considering environmental, social and governance (ESG) issues when making investment decisions and influencing companies (known as active ownership or stewardship). It complements traditional financial analysis done by investors by identifying a company's ESG risks and opportunities.
Impact investment is different from responsible investment as it is intentional, seeking specific impact categories often linked to targets (such as a percentage reduction in emissions) alongside financial return targets.
About the Author
Eva Rodriguez Rodriguez is the Director of Impact at Breakthrough Victoria, she is helping drive the development of our responsible investing and impact investing practices. She is also an engineer, ex-Space Agent and Superstar of STEM who is passionate about helping create the next generation of change-making, sustainable and inclusive companies that create impact at scale.