Thousands of families were left in limbo after the spectacular collapse of childcare operator ABC Learning in 2009, but out of the ashes emerged one of the earliest success stories of impact investing in Australia.
Impact investing – not just a fad
by Emily Dawson
Thousands of families were left in limbo after the spectacular collapse of childcare operator ABC Learning in 2009, but out of the ashes emerged one of the earliest success stories of impact investing in Australia.
Social Ventures Australia, along with three not-for-profit partners, saw the collapse as an opportunity to invest in an industry that was fundamental to the Australian economy. From that, the Goodstart consortium was born.
Goodstart Childcare now operates 650 childcare centres across Australia and turns over $1 billion annually.
Chairman of Social Ventures Australia Leadership Council Michael Traill AM says the key to successful impact investment is applying rigourous business discipline.
“We earn the right to do good stuff at Goodstart by making reasonable returns,” Mr Traill AM said.
A young industry with great potential
Impact investing is still in its infancy in Australia.
It’s defined as 'the intention to generate a measurable, beneficial social or environmental impact, alongside a financial return’. It is different to philanthropy in that it creates capital returns for investors.
The Director of the NSW Office of Social Impact Investment, Anna Bowden, says to date, the State Government has released five impact investments totaling $180 million.
Most recently, the Resolve Social Benefit Bond was released to improve mental health services and deliver a 25% reduction in utilisation of health and other government services.
“It was interesting to see this take off and be so extremely popular because mental health resonates with all of us. One in five of us will have a mental health condition at some point in our lives, so we intuitively understand it,” Ms Bowden said.
Australia yet to catch up
In 2014, British Prime Minister David Cameron established The Social Impact Investment Taskforce with a view to mobilising a market to improve society.
Australia was the only nation outside the G8 to be invited to participate, and as part of this, the Australian Advisory Board on Impact Investing was formed.
While Australia has some way to go to reach the levels of impact investing seen in some western European countries, the conversation is changing.
“The global conversation is moving away from philanthropy…and much more towards the way we look at all investments and whether they have positive or negative impact,” said Christopher Thorn AM, Partner at EY’s Climate Change & Sustainability practice.
The industry is reaching a tipping point, he said, on its pathway to becoming mainstream, with impact investing expected to be worth more than $300 billion globally by 2020.
Scalability still a challenge
However, the industry does face significant challenges, particularly when it comes to scale.
Richard Brandweiner, Partner at Leapfrog Investments says scale is a problem for superfunds in Australia.
“The Australian system is huge and the big funds really can’t do anything for less than $100-200 million…so what’s required is solutions that work within the government’s framework of the asset owners,” said Mr Brandweiner.
This conversation was part of the 2017 FSC Leaders Summit in Sydney on July 25.