The society-changing impact of Australia’s $2.8 trillion pool of retirement savings and how it can incentivise purpose-led businesses was the hot-button topic at a panel discussion during the FEAL National Conference.
Ross Piper chief executive of Christian Super, Damien Mu, chief executive of AIA Insurance and Helen Steele, head of the Shared Value Project agreed the industry has a profound opportunity to think about value in its fullest sense as consumers clamour to invest in companies that achieve both financial and social returns.
Shared value is not charity but a strategy that is focused on companies creating measurable economic benefit by identifying and addressing social problems that intersect with the business,” Piper said.
“It’s about enhancing the competitiveness and effectiveness of a business while aiming to improve social and environmental conditions in the regions where it operates,” he added.
The $1.6 billion Christian Super recently pledged $40 million to a specialist disability housing provider through its impact investing subsidiary. Says Piper: “This was a commercial investment decision that aligns deeply with a growing social need in Australia. The returns with this investment, as with all our investments, fit our required return profile in line with our broader investment strategy.”
The faith-based super fund is on a constant lookout for deals and opportunities that deliver both.
Piper said the performance of Christian Super’s impact portfolio in certain market cycles showed some variance – perhaps five basis points more or less. “It won’t exactly track the market but we firmly believe these assets have a long-term value both from a financial standpoint as well as a social impact standpoint.”
However, the chief executive has noted a degree of caution by what he describes as “status quo bias” investors who worry the shared value approach must inevitably compromise returns.
“Clearly, there is a different set of risks and it is arguably a more complex way to invest. However, as fiduciaries, we are convinced you can invest this way and still achieve our investment strategy targets without compromise.”
From where Piper sits, investing in an asset class that is uncorrelated with the rest of a portfolio makes perfect sense.
However, all three panellists conceded the industry hasn’t got the right message out yet.
“We need a narrative that we can articulate properly,” said Mu, a founding member of the Shared Value Project.
Mu underlined Piper’s sentiments on the importance of shared value investment generating solid returns.
“If we want to attract more capital, we need to deliver results,” he said.
“But at the same time, shared value is about purpose, doing the right thing and not being diverted by a short-term quarterly result.”
Commenting on the role of regulation in promoting this kind of investing, Mu strongly disagreed with outsourcing corporate responsibility and leadership to policy-makers.
“Policies are great. But the reality is regulations can be either a barrier or an enabler and I believe it is our responsibility to influence policy and bring the shared value principles to life.”
The AIA Australia chief said proving that shared value is authentic is a challenge, adding that the insurer has embedded the concept throughout the organisation in the firm belief the approach delivers the best outcomes.
“There will always be cynicism – but what matters is how much focus you place on that on that as against backing yourself and your organisation.
“So, celebrating the small wins is important,” he added.
Given that shared value projects and initiatives are fundamentally long-term strategies, using superannuation capital to create sustainable social progress is a natural fit, said Helen Steele, head of the Share Value Project.
“Studies clearly demonstrate a link between being a purpose-led company and performance,” she said.
Steele agreed with Mu that the industry needs to needs to reinforce the message that companies won’t lose out by taking the shared value approach”
“What is required is a change in mindset.”