HESTA believes the impact investing market is similar to the early days of the infrastructure sector, and on this basis it has invested in social housing to help develop investable models.
As Investment Magazine reported following a roundtable on the issue, there is a growing appetite among super funds for impact investments, but few suitable investment vehicles. Consequently, small allocations are being used to develop a framework for investing.
Debby Blakey, chief executive of HESTA, said the same process happened with infrastructure. “Funds went out in the early days and invested in infrastructure and it has grown a sector that’s now matured,” she said. “You now see this pipeline of infrastructure investment which has a lot of interest in it, and we are hoping with impact investing the same will happen – it will mature and we will have a good pipeline of investments.”
The $32 billion fund has made a $6.7 million investment into Horizon housing, a community housing provider operating in Queensland, which is focused on increasing the supply of social and affordable housing and helping low-income earners achieve home ownership in targeted areas.
“We feel the current allocation is appropriate for the current size of the market and the opportunities that are there at the moment. We are focused on the long-term development and we think the local market could grow quickly and significantly,” she said.
The investment was made through HESTA’s $30 million Social Impact Investment Trust that seeks to invest in opportunities that deliver both a measurable social impact and a financial return.
“The first one, having a social impact, from our point of view it’s really important to measure that, making sure we have a robust framework. We’ve been very tough on ourselves in terms of saying it’s got to be measurable and we’ve got to have a framework with that,” Blakey said.
She added that the partnership with Social Ventures Australia, which runs the trust on HESTA’s behalf, was “fantastic” as it gave a framework that delivered on both objectives and was a model that was working for the super fund.
“The partnership with Social Ventures Australia (SVA) is really important because we really need expertise to do this,” Blakey said.
This investment will involve the trust partnering with Horizon Housing to finance the purchase of management rights for 995 existing affordable housing properties and the future development of up to 60 new social and affordable homes. Horizon Housing has properties and projects across 15 local government areas in Queensland and northern New South Wales.
Through the trust, HESTA and SVA aim to build a pipeline of investments and grow Australia’s impact investment market by attracting other institutional investors.
SVA and Horizon Housing have also secured a majority stake in Australian Affordable Housing Securities (AAHS), an entity responsible for managing compliance of National Rental Affordability Scheme incentives for over 2,500 properties. Through AAHS, SVA and Horizon Housing plan to develop innovative financing products to assist low-income earners to achieve home ownership.
SVA’s executive director of impact investing Ian Learmonth said investment by superannuation funds like HESTA made it possible to fund more projects at the scale needed to make a meaningful impact on social and affordable housing challenges.
“There is a great need for social and affordable housing in Australia, with a shortfall of over 500,000 dwellings across the country,” Learmonth said.
“Through impact investment there is an opportunity to bring new capital to the issue to achieve both social and financial returns, and we’re actively looking for more deals in this space.
“This partnership with Horizon Housing will provide greater choice and security of tenure for social housing tenants, helping them to transition to the private housing market. It will also provide a much-needed additional supply of social and affordable housing for Queensland.”
A number of other funds, such as Cbus and First State Super, have also been researching the viability of investing in social housing, but have yet to allocate capital.