Shining a light on impact investment

As Leonard Cohen reminded us: There is a crack in everything. That’s how the light gets in.

The cracks are now showing in the myopic finance system. Our theory of change at Mindful Money puts consumers at the heart of driving change. We see our role as empowering investors to choose investments that align with their values. This is our way of cutting through the plethora of slogans that has come to characterise the investment market. It also recognises that consumers and corporate reputation have a powerful influence across the investment sector.

Mindful Money has started by helping members of the public to understand what they have invested in. Few Kiwis are told where their money goes when they invest in a KiwiSaver fund or a retail investment fund, and most are shocked when they find out. For many people this is the first stage of understanding that investment choices have real world consequences.

Shifting along the spectrum

Our aim is to shift investors along the investment spectrum towards impact funding. This may be through mainstream funds investing a part of their portfolio in impact companies or funds, or through investments into dedicated impact funds.

An important stage in making this spectrum more tangible was through Mindful Money’s inaugural annual awards for ethical and impact investment last June. The awards had a strong focus on celebrating those funds that are shifting funding along the spectrum towards higher impact. We were able to celebrate the funds that are investing part of their mainstream fund into impact as well as the leaders in our emerging impact investment ecosystem.

Signposting Impact Funds

The initial focus of Mindful money’s outreach on mainstream investment has generated public awareness and a flow of traffic to the website. After years of fielding inquiries from members of the public asking how they can invest in impact funds, we have developed a directory of retail and wholesale impact funds, launched this month. This is a starting point and your feedback, as well as suggestions for additional funds, would be very welcome.

Some retail funds have adopted the brand of impact funds. We are being cautious about endorsing these claims without strong evidence of explicit intention to generate positive social and/or environmental impacts, evidence of impact and objective measures.

It is important that the term ‘impact investment’ does not lose credence and authenticity, as has been the case with the confused and confusing terms of ethical, responsible, sustainable, green, ESG investment. The Impact Investment Network has a crucial role in defining what is meant by impact investment in Aotearoa, building on te ao Māori values.

Building demand

Despite promising initiatives, the New Zealand market has been slow to shift towards impact investing. Many fund managers still claim there are not enough investors to justify the establishment of new impact funds. We disagree. There is demand if potential investors are given credible options and opportunities to invest. In order to send a message to the fund providers, Mindful Money has started a campaign that encourages members of the public to demand more investment in impact enterprises and the development of new impact funds.

Please sign and share!

We look forward to working with a range of actors in supporting impact enterprises and impact funds. We have held a number of online seminars and podcasts in 2020 and 2021 on the different funds and issues around impact investment. They are intended to build public education and awareness around impact investing. More seminars will be held next year.

The provision of capital is only part of the story - we also need to build the pipeline of exciting initiatives providing climate solutions, social investment and natural systems regeneration. But now there are real opportunities for finance to be part of the solution, not just a funder of the problems. Cracks in the traditional finance system are widening, creating space for impact investing to flow.