What is making impact investing a discrete asset class is the gradual development of robust data and analyses. Like the ESG factors which have become ingrained in the management of big super funds, impact investing is establishing itself as a legitimate investment sub-set… with some difficulty.
According to Ben Thornley, a managing partner and co-founder of US impact consulting firm Tideline, metrics to assess impact investments are “desperately needed” to enable a clear diagnosis for investors to assess that part of the market.
Thornley, a New Zealander who grew up in Australia and became a leading journalist among specialist investment trade media – including overseeing editorial at ‘Investor Daily’, ‘Investor Weekly’ and ‘IFA’ magazine and launching the database InvestorSupermarket.com (now owned by Morningstar) – told the impact investing conference last week that the market had “bifurcated”.
“There are big super funds on the one hand and smaller specialist funds on the other,” he said. “The data and what it reveals are important. We all see the superannuation market as being the end of the rainbow. They are sitting there waiting for the right deals and the intermediaries to come along and offer those deals… The institutional investment market is tough. Super funds want to make $100 million investments which are difficult to source. It’s now hard yakka to continue to develop the market.”
As an example of a market which has developed over time, Thornley said, the US affordable housing market had only recently become investment grade, and that took about 30-odd years.
He added that Christian Super’s new impact investing offshoot, BrightLight, was a “massive development” which would likely be replicated elsewhere in the super funds sector.
“You can’t underestimate the importance of data in influencing key decision makers,” Thornley said. “What Mike Baird said (see separate report) was unbelievable. It’s all about his personal advocacy and what he takes back to his colleagues to talk about.”
Internationally, the big shift was from impact measurement, such as through the Impact Investing Australia report and other metrics, to “impact management”. Recently, for instance, Thornley said, his firm had been working on the interaction between the consultant and the client.
The report released last week was published by the not-for-profit Impact Investing Australia. The conference, however, is a privately owned company, Impact Asia Pacific Pty Ltd, , which is now in its third year.