To acknowledge the opening of the trans-Tasman travel bubble and Anzac Day we're featuring Australia and New Zealand impact investment collaborations.
What better place to start than inviting Simon O'Connor to share his thoughts.
Simon is a founding member of the NZ NAB and CEO of the Responsible Investment Association Australasia (RIAA). He has a fascinating background at the intersection of economics, finance and sustainability.
As someone who operates at the intersection of worlds, we’re delighted to have Simon share his unique perspective on the intersection of the impact investing in Australia and New Zealand.
David Woods, Chair of the New Zealand National Advisory Board (NZ NAB), said “Simon is an honorary Kiwi, such is the value of his contribution to the NZ NAB that we’d swap him with Russell Crowe in a half heartbeat”.
How did you get involved with the NAB?
I’ve been fortunate to be involved with the NAB since its inception out of the Impact Investing Network (IIN), in the hope that I might be able to bring to this important emergent field a view from the institutional investment market, as well as insights from across the membership of RIAA from both sides of the Tasman.
As the broader investment markets are increasingly being called to account for the ‘impact’ that their investments decisions have. I see impact investment as a really important ‘sandbox’ where pioneering approaches to finance are being tested and refined that will have massive lessons for the investment industry well beyond just impact investors.
What we’ve learnt from over 20 years in responsible and ethical investment will both shape, and be shaped by, impact investment, so for me it’s been hugely insightful and a great opportunity to be part of this stage of growing a market in NZ through this role on the NAB.
What have been your highlights while on the NAB?
Seeing a fledgling idea come to life is an exciting thing to be a part of. Working with my colleagues on the NAB, I’ve had the privilege of working with and learning from an incredible group of leaders from across Aotearoa New Zealand, and have learnt so much from them all, all in the interests of contributing to this burgeoning area that is impact investing. A huge note of gratitude to my fellow NAB members.
Impact investment is unique in that for it to be successful, this industry needs to build bridges across sectors and communities that don’t usually sit around a table together, nor even speak the same language or jargon.
The NAB is a microcosm of that, building those bridges to support efforts across sectors that, if successful, will help to build the ecosystem required for this market to thrive and capital to flow to support people and the planet.
Most significant highlight for me personally would be the insights from our efforts to learn from Te Ao Māori perspective and how valuable this perspective is to any discussion about impact investment.
What trends are emerging from the Australasian impact investing sector?
I’m fascinated to watch how lessons learnt in impact investment. How we measure impact, balance financial and non-financial returns, report on our progress - are being watched so closely by an institutional investment community who are starting their own journey to articulate their own impact. In Australia we’re seeing many significant institutional investors starting to report on the broad impacts of their full portfolios, whilst simultaneously starting to allocate capital to dedicated impact investment strategies.
It also feels like we’re only moments away from impact investment really hitting scale.
In particular, an emerging area of activity is impact investment in listed equities of which many such funds are coming to market, some of which are challenging the assumption that true impact can’t occur in public markets. It’s interesting to see the shape of these funds as they emerge, either as very strong impact investments, or as a minimum, very positive sustainably-themed funds.
What stands out to be an emerging niche for NZ, whereby there is a chance to really lead the world, is the strong focus on local place-based impact investment. Finding strong alignment with the focus of community trusts, it’s a really unique area of development in impact investment that I think in years to come, NZ will be teaching the world about.
What are examples of Australasian collaborations in impact investing?
Collaborations are key in impact investment, more than any other form of investment. As such, I’m encouraged by the generous level of collaboration and sharing across this sector, and in particular in NZ. It’s this generosity in sharing informally that has underpinned the successful formal collaborations in responsible and impact investing.
Probably most ambitious of these has been The Aotearoa Circle’s Sustainable Finance Forum. An incredibly ambitious initiative aiming to get a consensus position from a cross sectoral initiative, as to how to build sustainability into the financial services sector. The Roadmap that was released in November last year will be a reference point for what is needed to build our industry for years to come.
What research and resources would you recommend from Australia on impact investing?
In the last three years, RIAA has done some incredibly deep dives into impact investment in our region through our research program (see here). These reports have worked with academics and other research partners to go into much greater depth than we have researched any other responsible investment strategy and hopefully form important foundation research that sets the benchmark for us to measure the future growth and development of impact investment against.
What are the challenges for impact investing in the responsible investment spectrum?
Fundamentally, impact investment has to measure, manage and report on externalities. Non-financial outcomes that are often notoriously hard to measure and quantify. Whilst there has been much work done over many years, I fear we are still some way from a unified framework that will present a consistent solution that we can compare all impact investments against.
But that shouldn’t stop us. And whilst work proceeds on those consistent frameworks, we must progress as best we can, not letting perfect get in the way of the good as we continue to learn and grow this industry.
What are the opportunities for impact investing in the responsible investment spectrum?
Done well, impact investment will influence the full suite of approaches to responsible investment, and as it takes off we’ll start unlocking billions of dollars of investment capital into investments that understand their impact, shifting capital towards supporting companies and assets that are contributing to a better future, and moving capital away from the most harmful of investments.