Impact investing arrives on the institutional investment policy agenda in Australia and Canada

High-level reports prompt fiduciary reviews in both countries for consideration of impact financing.

A government-sponsored inquiry into Australia’s financial system has added impact investment to the scope of its investigation and outlined a series of policy recommendations to boost the sector after it was urged to by a report made on behalf of the chairman of UniSuper, the $28bn superannuation scheme. Last year, the Prime Minister of Australia Tony Abbott announced a new inquiry into Australia’s financial system to be chaired by former Commonwealth Bank head David Murray, whose goal is to examine how the financial system could be positioned best to meet Australia’s evolving needs and support the country’s economic growth. A similar inquiry was held was 16 years ago and led to major reforms. Last week, the inquiry released its interim report after an initial consultation. The impact investment recommendations followed a submission from Social Ventures Australia (SVA), supported by, and made on behalf of Chris Cuffe, the chair of UniSuper, which serves the staff of universities in Australia.
SVA had urged the inquiry to consider establishing a social investment bank like the UK’s Big Society Capital that could be supported by Australia’s commercial banks and funded by unclaimed superannuation and bank accounts. It also argued that Australian trust law was a barrier to the development of impact investing because it does not allow trustees to take into account any social or community impact alongside standard fiduciary investment responsibilities.In response, the government financial system inquiry includes a chapter on the sector in the interim report. It says more impact investment could trigger a marked change in the way government deals with social or environmental problems by supporting entrepreneurs to find new solutions to entrenched social problems. But it notes that some superannuation trustees consider their fiduciary duties to be a barrier to considering impact investment. It recommends that government provide guidance to explain how superannuation trustees can facilitate impact investment within the existing regulatory framework. Submissions in response to the interim report are due by August 26.
Canada move
There are also similar moves in Canada to get impact investment on the policy agenda.
A new report on impact investment written by the Bank of Canada, the MaRs Centre for Impact Investment and Purpose Capital, makes a number of recommendations to government on stimulating the market.
For example, it urges Canada’s federal and provincial governments to mandate pension funds to disclose responsible investing practices, clarify fiduciary duty and provide incentives to mitigate perceived investment risk.