Impact Investing Network
Impact Investing In Action - BayTrust Case Study
There’s plenty of good examples of impact investing in action in Aotearoa New Zealand. By showing how impact investing principles are being applied it’ll help investors to take action and make more impact investments.
This case study covers how BayTrust, a Community Trust managing over $250m of investment capital, applies an impact assessment framework, to maximise the impact it's having on its communities, and ways to measure and report on impact.
The Centre for Sustainable Finance, PwC, and the Impact Investing Network released the much-anticipated document guidelines and principles for impact investment in Aotearoa New Zealand.
The purpose of this document was to define a working definition and guiding principles for impact investing for Aotearoa New Zealand. To summarise, the below impact investment principles are intended to serve as a foundation to guide investment by investors and investees into impact investments.
Demonstrate intentionality: Invest with intention to deliver impact
Demonstrate measurability: Establish clear metrics for impact measurement
Manage for financial returns or neutrality: Actively manage investments for the purpose of positive or neutral returns
Demonstrate additionality: Impact should be achieved that wouldn’t have occurred without the investment
Engage with stakeholders to the impact: Ensure the impact is aligned with stakeholders’ interests including investees
Report transparently: Report on progress of impact investment
Consider trade-offs and potential perverse outcomes: Evaluate trade-offs between alternative objectives across social, cultural and environmental concerns
Recognise the articles of Te Tiriti o Waitangi: Understand the articles of Te Tiriti o Waitangi, and actively avoid misalignment
We will continue to demonstrate how these principles are being put to action by key impact investing leaders in Aotearoa New Zealand. This month we feature BayTrust.
BayTrust is a community trust focused on accelerating bold meaningful change, assisting communities and the environment to flourish in the Bay of Plenty area of New Zealand. The Trust manages over $250m of investment capital, and has committed to using all its resources including investments, personnel and granting to progress its priorities in Housing, Kaitiakitanga, Community Wellbeing and Tū Māori Mai.
The Trust’s community work was originally facilitated through a traditional philanthropy model solely focused on grants, however as a result of challenging returns during the GFC, from 2015 the Trust expanded into also using its balance sheet to make an impact and help drive its purpose. Initially this was via social loans at low or zero interest however over time as its experience in impact investing increased, the Trust widened what it could invest into and how, and adopted impact principles to guide this, including: application criteria, alignment to the Trust’s strategic objectives, additionality, intentionality and an impact investment framework.
An important step in their journey towards impact investment was taken in 2016 when the Trust adopted a formal Impact Investment Policy and Strategy and a targeted allocation in their SIPO.
As a result, by 2022, the Trust had 5% or $13.3m of its funds in impact investments, with a long-term goal to increase this to 15% allocation and for all its investment funds to be aligned with positive social or environmental outcomes by 2030 (i.e. ‘sustainability themed’ investments as per the RIAA definition), on the basis that this not only strongly aligns with the Trust's values but will also likely to lead to superior financial returns.
What type of impact is intended and how is this qualified?
The Trust’s impact investments are aligned with the Trust’s overall objectives which include environmental outcomes, social housing, family support, youth opportunities, and community inclusion/cohesion. The Trust has developed and adopted an impact thesis which includes board-level targets on risk, return and impact. They have also adopted an Impact Assessment Framework which considers impact value and magnitude, beneficiaries, risk, contribution and risk.
An example of the Trust’s impact investments is a $2m investment in a Opotiki Mussel processing factory alongside central government, local community and Iwi funding. The investment is structured to deliver an expected return of 15%. The projected social impact is measured in the number of full-time jobs created within a region of high deprivation and under employment.
How is impact measured; what metrics are used?
The Trust states that it uses an impact assessment scorecard system adopted from the Impact Management Project.
Which of our principles are observable here?
P5: Investees and Stakeholders - Their Impact Assessment Framework considers who the beneficiaries are, and if these are a high-needs group in their Bay of Plenty area.
P4: Additionality - Their Impact Assessment Framework considers ‘Contribution’ by looking at the counterfactual impacts, specifically, what would occur without the investment.
P7: Unintended outcomes - Their Risk Management and Due Diligence processes consider the likelihood of unintended social or environmental consequences or impacts.
P6: Reporting - The Trust has integrated their Impact Investments into their regular Trust’s impact reporting systems.
P8: Te Tiriti - The Trust has integrated Te Tiriti into its Impact Investment Policy.