AustralianSuper has hired an external impact investment consultant to review the effect its asset allocations have in Australia.
The largest super fund in the country is following the lead of smaller funds such as Christian Super, HESTA and Cbus Super, which are pioneering ways to generate good risk-adjusted returns while giving additional benefits to the community.
Impact investments are most commonly deployed in areas of the real economy, including private markets.
The $109 billion AustralianSuper allocates 23 per cent of its portfolio to private markets, split between infrastructure, property and private equity.
“In terms of impact investing, we are looking at this area, but we are just starting,” AustralianSuper ESG investments manager Kelly Christodoulou said.
The impact consultant’s report is due by the middle of 2017 and AustralianSuper is waiting for the findings before taking any action. The super fund declined to name the consultant.
“Our main philosophy is that we are an active owner and we believe companies that have good environmental, social and governance [ESG] characteristics provide better long-term returns for members,” Christodoulou said.
She added this was built on three pillars: ESG integration, stewardship and – for those members who wanted it – screening options.
Christodoulou made her comments during a panel titled Proactive Social Investments in the Real Economy at the Conexus Financial Real Estate & Private Markets Conference, which was held in Melbourne on February 27-28, 2017.
Brightlight Impact Advisory head of research Simba Marekera – who was also participating in the panel – said one of the benefits of incorporating impact investments into a portfolio was a low correlation with equities and bonds that improves diversification.
Brightlight is the social impact-focused funds management and consultancy arm of Christian Super, a $2 billion faith-based fund, where Marekera previously held the title senior portfolio analyst, impact and unlisted assets.
Another key characteristic of social impact strategies he highlighted was the ability to de-risk investments by collaborating with governmental or international institutions.
“We’ve been able to partner with organisations such as the World Bank to provide capital on social infrastructure globally, to ensure that we are managing some of the risks you have when investing in developing or frontier markets,” Marekera explained. “Partnering with a non-commercial organisation helps in terms of getting a social licence to operate in a particular area, but also with understanding the social issues you are trying to solve.”