Ben Gleisner.
An injection of funds by the Government would help with investment readiness for a pipeline of companies and projects.
There is an "avalanche of capital" waiting to get into impacting investing in New Zealand with investors poised to step up their involvement.
The impact investment sector funds projects and companies intending to generate positive, measurable social and environmental impact alongside a financial return.
It is still at an early stage in New Zealand — around four or five years behind Australia.
But the country is in a good position to leapfrog Australia in the coming years, if the Government steps up support, says Jackson Rowland, a director of Ākina Invest.
"I think we can learn from their example and overtake them," he adds.
A report — Impact Investor Insights 2019 Aotearoa New Zealand — published by the Responsible Investment Association Australasia (RIAA) in partnership with the University of Auckland, provides useful insights. Just under 100 survey respondents — ranging from investment managers to family offices with $83.5 billion assets under management — indicated they will allocate $5.9b toward impact investing in the medium term (five plus years). Of this, $3.4b will come from active impact investors and $2.5b from investors new to the sector. This equates to a six-fold increase in capital currently deployed of around $890 million.
Of new investors, nearly one-third (28 per cent) are actively exploring impact investment options in health, the environment and conservation.
Worldwide around US$1 trillion that has gone into impact investment and it's increasing year on year, says Rowland.
Soul Capital CEO Jamie Newth, who co-authored the Impact Investor Insights report, says one of the things holding back larger investors so far are the investible deals that make sense to them.
"There needs to be a structuring of investments that have social and environmental impact front and centre, done with thought and design," says Newth.
The myth that impact investment doesn't deliver has been dispelled.Jackson Rowland There needs to be a structuring of investments that have social and environmental impact front and centre.
And there needs to be an eco-system of actors to make this happen from professional services companies and investment banks to venture capital and private equity.
The Māori economy will be important to the growth of impact investment in New Zealand, adds Newth. Māori have never separated social and environment good from their enterprise.
The myth that impact investments don't deliver good returns
The Impact Investor report shows that 81 per cent of active impact investors believe their financial return expectations are being met or have exceeded expectations.
New Zealand currently has a handful of impact investment funds. Impact Enterprise Fund, involving Ākina Invest, New Ground Capital and Impact Ventures, was formed in 2018 to not only make impact investments but also to prove that they were achievable in NZ.
Rowland would like to see the NZ government to throw some money in the pot (the Australian government has put $50m over the past 10 years into supporting impact investing). An injection of funds by the NZ government would help with investment readiness for a pipeline of companies and projects, he says. The impact Enterprise Fund has looked at 400 companies and invested in four with another two investments imminent. Rowland says this is pretty standard in the venture capital world — "the myth that impact investment doesn't deliver has been dispelled".
The difference with impact investors is they are more active and more passionate about seeing their investments succeed, adds Newth.
GROUNDED
Grounded was launched at the beginning of 2020 by former Bird on A Wire restaurant group owner, Ben Grant, and business partner, Josh Kempton, whose background is in sustainable packaging.
The platform helps SMEs with the best sustainable packaging solutions. Flexible packaging is particularly problematic and the largest and fasted growing area of packaging globally, says Grant, who knew from his own experience how hard it was to find the right kind of sustainable packaging.
"If you're a business hoping to make your own sustainable packaging it's a minefield. Everyone's got some green tick, eco this, and the vast majority are utter rubbish," he says. "It's a full time job — you've got to put someone in a procurement role to spend three quarters of their time on packaging and, unless, you're bigger, you don't have that capacity — that's the problem we set up to solve."
With their supply chain platform, the co-founders, with offices in Auckland, Sydney and London, now have a network of factories they work with across China, Thailand, Malaysia, Turkey, Australia and New Zealand. The company educates businesses on the materials available. "Then we go away and find the best solution and take a fee on the transaction," says Grant.
They contract manufacture for customers in Australasia, UK, Canada, the US, Thailand and Singapore. Their focus is on two product sets — one for food and one for e-commerce.
Grounded only launched formally this year but had a lengthy build-up period. Both the Impact Enterprise Fund and Soul Capital have taken stakes in the company.
"There's no leniency, you are still held to the same standard of any investor, but they also need you to have some sort of wider social impact," says Grant.
Growing "at a rate of knots," the founders enjoy the regular contact with their impact investors, meeting with them every couple of weeks. They support their vision, says Grant. "They've spent a lot of time exploring our business model. There's so much noise in the packaging space and our investors have opened a number of doors for us that would otherwise not normally open until we were well established." Grounded already has good news for its impact investors. Monthly revenue has quadrupled over the course of the year to date and business has grown very strongly during Covid-19.
"We launched at the worst possible time but had a number of customers prior to Covid and we've added 180 customers so far this year. Clients include Bostock's New Zealand and North Beach surf stores.
WAIKAITU
Silicon Valley entrepreneur Alex Pressman set-up Nelson-based Waikaitu eight years ago.
The company produces a range of certified organic fertiliser, bio-stimulant and crop protection products manufactured from an invasive non-native brown algae species of seaweed called Undaria pinnatifida.
Pressman, who had Sequoia Capital among his investors at his previous Silicon Valley business, has been impressed with the input by the Impact Enterprise Fund in the past year.
Pressman says the fund's directors have worked harder to add value, and provide more value, than any of his prior investors.
"What the impact investors have done for Waikaitu, is to tap into a network of limited partners and community networks and proactively work to introduce the company to business partners and customers," he says. "This is very valuable to a small company."
They've also provided value in reviewing financial data from the company and modelling exciting ideas for them, he says.
International markets for Waikaitu include the European Community, China, Vietnam, Israel and the US, but the number one focus is New Zealand. "We understand markets are bigger overseas. But for us, first we want to take care of the regenerative agricultural needs of New Zealand.
"One fertiliser product with big potential in a world of unpredictable weather events, is FruitGuard which armours plants against periods of stress so they can grow longer in areas with low soil moisture as a result of drought. It has also been shown to reduce cracking in cherries and grapes — something that happens during times of late season rains."
So far Pressman has turned away international investors wanting to keep his partners local.
"It's important to have domestic control from start to finish when you are building a new industry. It's easy to sell masses of raw product overseas but that's not long-term strategic thinking," he says.
"Domestic investment and control of the industry will mean Waikaitu can provide more, better quality jobs in New Zealand, and sell a higher-value, finished product that can sustain local communities — and our environment — long term," he says.
Pressman agrees with the proposition that if impact investors can't show a return on their investments, then impact investing will only be a market niche.
"They need to prove that money can be made by doing good."
Waikaitu is delivering to its investors. It has seen growth in excess of 30 per cent this year, and business has tripled over the same quarter of last year.
"They share our vision — which is more than just making a buck. They want to make a dollar, but it's got to be a good dollar that provides a benefit to a wider community. It's not a reductionist outlook. It's an integrated outlook on the business world, looking at all stakeholders, human and non-human and looking at the future."
COGO
The majority of the 150 plus shareholders in CoGo, formerly known as Conscious Consumers, are impact investors, says co-founder Ben Gleisner.
"Many companies like us for the fact that we create an impact. For example, getting companies to change labour practices," he says.
CoGo has developed an app that helps consumers align their spending and environmental and social values — a bit like an ethical fitbit.
CoGo offers a free listing on the app for any business that has been independently accredited on specific environmental or social grounds, such as paying their staff a Living Wage or measuring and reducing their carbon emissions.
Companies can then pay a monthly subscription to "enrich" their app listing and to access data on the issues their existing and potential customers care about plus how much they are spending on their business.
An example: Wellington bar The Rogue & Vagabond found through CoGo that paying its staff a living wage was an important issue to its customers.
So the business adopted it. "As a result it attracted 50 new customers and the people already going there spent twice as much," says Gleisner.
The former Treasury economist took the platform to the UK in 2018. The CoGo app is now used by 25,000 consumers in NZ and 30,000 in the UK. More international expansion is planned.
CoGo announced a partnership with Westpac in June. From September, CoGo app users in New Zealand will be able to track their personal carbon footprint in real-time with the the tracker allowing users to securely link their transaction data from any major NZ bank to the app using open banking technology.
Since announcing the Westpac partnership, CoGo has had strong interest from several large billion-dollar international impact investing funds, says Gleisner.
Impact investor support has been important and is more than just financial.
"They definitely bring a belief in the mission," says Gleisner.
Newth introduced him to the social enterprise community, businesses and academics in the UK, giving him credibility over there.
The entrepreneur's mission is ambitious.
"We want to fundamentally disrupt the economies of the world. If 500 million people are using CoGo the impact would be unparalleled, and get the world better aligned to the values of its citizens," he says.
At the moment, markets are not delivering, he argues.
"There is market failure around information asymmetry, and CoGo empowers people through better information and incentives to act."
Consumption dwarfs investment in terms of volumes of money and associated impact on the planet, says Gleisner.
"Consumption is on a different scale, it's power that is really in their pockets, that is what we're trying to do."
His plan? "We just want this business to be the business New Zealand is known for in the future, rather than carbon-intensive industries like Fonterra."
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