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Preface: Putting our money where our mouth is

“The next few years are probably the most important in our history”

The primary challenge of our time is to balance the miraculous gains of the modern global economy with the risks and inequalities that have grown with it.

Through commitments on climate change, the setting of the Sustainable Development Goals
(SDGs), and, at home, the introduction of policies like the Living Standards Framework, we seek ways to combine prosperity, now, with a viable legacy for future generations.

However, the efficacy of these strategies often seem at odds with the size of the task we face; sometimes even naive. They are undermined by data that tells us that we’re not moving fast enough, and diluted by both compromise and cynicism. We continue to lack the collective conviction to truly get on top of any number of persistent and pressing issues.

There is good reason for the common expression ‘putting your money where your mouth is’. Investment, perhaps more than any other action, reveals the sincerity of an intention. It demonstrates material commitment, prioritisation, and a willingness to take risks in order to achieve a considered, and desired, future gain. Finance has been one of humankind’s key tools, building and adapting civilisations for thousands of years.

If we, citizens of Aotearoa New Zealand, and the world, wish to realise aspirations of long-term prosperity and well-being, we need to have a new conversation about money. How we invest, what we invest in, and what we value, in both senses of the word.

‘Impact Investment’ is a concept around which we can have this conversation. Coined in 2007 (at the Rockefeller Foundation’s Bellagio Center in Italy), ‘impact investment’ is not a new idea. However, it is providing a unifying language for a range of progressive financing practices and enabling new thinking about the fundamental purpose of capital. Practically speaking, it now represents a growing global movement and the most convincing financing strategy we have to realise a stable and desirable future.

Introduction

Around the world, citizens, communities, businesses, investors, institutions, philanthropists, and governments are all increasing efforts to address pressing social and environmental challenges, while maintaining the gains achieved by the modern global economy.High-level indicators of this intent include the Sustainable Development Goals (SDGs) and the Paris Agreement to combat climate change. Commitments to these agreements demand a comprehensive change in the makeup of our economies, and set ambitious and comprehensive targets in order to realise a safe, sustainable, and equitable future. New Zealand is a signatory to both.

However, with a global annual financing gap for achieving the Paris Agreement and SDGs estimated to be in the trillions of dollars, and with public resources already stretched, new pools of capital are required to deliver these collective aspirations.

Getting more from our money across a quadruple bottom line requires investment approaches that go beyond the principle of ‘doing no harm’. It demands a fundamental reframing of the purpose of capital, more sophisticated accounting of externalities, and for finance to be a friend of sustainable development, rather than a threat. It requires putting social and environmental value at the heart of investment strategies, and putting more capital into productive activities that are preventive, regenerative, and inclusive of underserved populations. It also requires cross-sector cooperation, and finding ways to align the interests of actors who are unused to working with each. This, in essence, represents the intention and practice of ‘Impact Investment’.

While globally, impact investment is on the rise, in New Zealand the market remains nascent – largely ad hoc, unstructured, and underdeveloped.

In many ways, this is at odds with New Zealand’s progressive approach in areas of social policy and sustainable development, such as the Living Standards Framework, the upcoming 2019 ‘Wellbeing Budget’, the ‘Social Investment’ approach, and pioneering legal models for the designation of public lands, i.e. Mt. Taranaki and the Whanganui river.

It is, however, consistent with other areas where we need to do better. This includes the coherence and ambition of our investment strategies across the built environment, housing in general, land use, biodiversity, water quality, transportation, waste, supply chains, and support for innovation and hybrid business models. All these issues reflect, in part, the lack of an effective capital market aligned to a national identity that takes pride in kaitiakitanga, a hopeful vision for the future, and the hard realities of laying a pathway to genuine sustainability.

Pure Advantage champions economic models for green growth, and sees an opportunity to help catalyse greater uptake of impact investment by raising the profile of trends and developments, and shining a light on market opportunities that are specific to the New Zealand context.

We aim to promote the mainstreaming of financial investments that can progress New Zealand’s wellbeing across environmental, social, and economic outcomes, and through Financing the Future, we seek to raise awareness and promote action to that end.

Financing the Future is a mixed-content project that combines a briefing on impact investment, with video interviews with thought leaders, investment case studies, and provocations from experts working in the areas that offer immediate opportunities for impact investment.

We have aimed to keep the content succinct, as we are well aware of the mass of information just one google search away. Where we do cover definitions and concepts, we have sought to synthesize the most credible thinking from around the world.

Where Financing the Future is different from other resources, is in the platform it provides for discussion specific to Aotearoa New Zealand. As a country, this is our domain, and only we can determine appropriate strategies to grow impact investment here. To this end, we conclude Financing the Future with some specific recommendations for market development.

Impact investment bridges the interests of investment, grant making, business, non-profits, social change, evaluation, policy, standards bodies, research, and accounting. It represents a converging world and a future-focussed agenda. With that in mind, if any of these practices or professions are of interest to you, we invite you to read and watch the content we have provided, and then also respond with your own thoughts and perspectives.

About the author

Pure Advantage
Pure Advantage

Pure Advantage functions as both a generator and communicator of knowledge, undertaking and supporting a variety of green growth-focused research activities and outputs. Through this work, we seek to disseminate cutting-edge theory and practice that will transform how New Zealanders understand and manage the relationship between the environment and the economy.

We advocate for economic models that generate both profitability and positive social and environmental outcomes. In promoting these models we seek to uphold the ethical imperatives of impact investment while also dispelling any lingering misconceptions around wealth creation and environmental protection being contradictory goals.

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