Positive Outcomes summary
Positive Outcome companies are those where benefits for people and the planet make up the majority of their business, and which are held in NZ retail funds. Mindful Money has a rigorous process to select candidates and regularly reviews their ongoing eligibility.
Explanation of Community Development theme
This theme covers entities that provide finance or new solutions to improve outcomes for communities. Many nations have high and rising levels of social & economic inequality alongside challenges in balancing budgets with rising public expenditure. There is growing interest in how private investment by funds can improve services, alongside public spending. This theme is one that provides high direct impact for an investor. Savings in KiwiSaver and other funds are invested by fund managers into new start-ups, impact bonds or community projects that deliver additional new positive outcomes for communities.
Sub-categories and criteria
- Housing: Entities selected for housing provide or finance for these types of housing:
- Access to Education: entities providing more equitable access to education for all, aligned with SDG4 targets. This includes ensuring all youth achieve literacy and numeracy, with a focus on marginalised groups.
- Human Rights: Sustainable & Social Development: initiatives that aim to improve outcomes and reduce discrimination for disadvantaged groups (e.g. female equity, LGBTQIA+, social or ethnic minorities, indigenous peoples, and refugees).
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Social housing: rental accommodation provided at below-market rates for people receiving welfare benefits/low incomes or specific housing needs, or
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Affordable housing: rental payments are ≤ 30% of median household income for the area, or
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Build to rent developments:housing constructed to high standards (for environmental and health performance), and with features to support long-term tenancies and community life.
Why is each sub-category important?
Housing
Reports continue to show an overall housing shortage in NZ, particularly for affordable housing, and that almost half of non-owners spend more than 30% of their income on housing (Stats NZ). If people have an affordable home then more income can be spent on other needs such as food, health and utility bills. Good quality housing improves the physical and mental wellbeing of households. All of society benefits when families have stable housing and essential workers can live near parks, schools, and public transport in alignment with SDG11 targets.
Entity Example: Housing Australia
The housing delivery agency of the Australian Government provides safe and secure housing to meet gaps in the private market. They issue long-term bonds (backed by the Australian government). Funds are lent to not‑for‑profit providers to deliver projects for social housing (rents at 25%-30% of household incomes), or affordable housing (rents are at a discount to market rates). They also support vulnerable populations including those experiencing domestic violence and young people at risk of homelessness.
Access to Education
Marginalised groups can be left behind by mainstream education providers. Companies in this category have solutions to improve outcomes for youth who might be marginalised or have different needs.
Company Example: Kai’s Education
A NZ company focused on innovative educational approaches that reflect the children's special needs. Their braille programming cards allow kids to learn foundational coding concepts in a more accessible way for a variety of learners.
Human Rights: Sustainable & Social Development
Unlike traditional development or aid models, finance initiatives can empower people to design and deliver solutions to meet the needs they see in their communities. This model can improve outcomes on a range of SDGs, e.g. growing more affordable food by supporting small farmers (SDG2 Zero Hunger) or Gender Equality (SDG5).
Innovation in finance has led to the development of categories of bonds which provide non-financial outcomes alongside financial returns. The main types are Green, and Sustainable and Social Bonds. The International Capital Markets Association (ICMA) provides principles for each type. Sustainable Bonds can deliver environmental and/or social outcomes whereas Social Bonds focus only on social outcomes.
Investment Example: The IIX Orange Bonds (Women’s Livelihood Bond 5)
These bonds (issued by the Impact Investment Exchange) pool investor capital and lend to impact enterprises in Asia and Africa to improve women’s livelihoods. Enterprises might be small businesses or farms owned by women or that employ women. Some funds are directed to women via microfinance providers in each country. There can also be other benefits for the climate and communities, e.g. improving access to water and renewable energy. The series has mobilised over US$288 million in private capital to empower over 3.3m women.
Investment considerations relating to community development
Innovation in Sustainable or Social bonds has opened new investment opportunities in this theme. Investment in bonds has direct, additional impact as the funds go towards specific projects targeting communities and UN Sustainable Development Goals (SDGs). These bonds provide both financial returns and non-financial positive outcomes. They need to meet strict criteria for outcomes and accreditation.
For the Housing category, funds provided by investment also deliver direct impact as the funds are used for a specific housing project. In NZ and other countries, more KiwiSaver funds are allocating some of their investment towards housing. This gives any investor in NZ the opportunity to have a direct positive impact for people in Aotearoa.
Investment into housing is often through fixed income bonds. These may be issued by a government housing agency or an agency like the Community Housing Funding Agency (CHFA). Funds are lent to Community Housing Providers (CHPs) who build social housing units. The borrower uses rental streams to pay interest to investors and repays the bond at the end of the term. Alternatively, a large housing provider might operate as a company and issue shares. The fund can then buy the shares.
A fund provider can add property investments to specific funds when their investment policy allows it. Assets like property and bonds can provide stable ongoing returns and smooth out volatility in performance from share investments. However, fund personnel need to manage specific risks, including credit and default risk, liquidity risk (as it is difficult to convert property assets into cash), geographic concentration (e.g. over exposure to the Auckland property market) and project risk. Investors should review the Fund’s documents (e.g. SIPO and PDS) to understand the provider’s approach.