HESTA’s CIO Sonya Sawtell-Rickson said sticking to the Sustainable Development Goals (SDGs) guidelines has actually helped the fund stay ahead of the risk-return curve, rejecting the perspective that institutional investors have to sacrifice returns for sustainable finance objectives.
Sawtell-Rickson recently appeared on an episode of the Don’t Get Fired podcast, hosted by Stanford University researcher Ashby Monk and venture capitalist Daniel Adamson. Speaking of the evolution in HESTA’s responsible investment approach, she said the biggest challenge so far was finding the cohesive framework.
“We thought about a number of different ways we could do that, but we kept coming back to the United Nations’ Sustainable Development Goals, which was really an incredible, nationally aligned framework for setting out some of the world’s biggest challenges and capturing some of these big risks,” she said.
“Now, obviously, there are 17 [goals] – there are a lot of challenges out there.
“We really wanted to be thoughtful about what was realistic for us to go after and how many of those were really aligned to what mattered to our members.”
On top of the trend
According to HESTA’s website, the fund has adopted 11 out of the 17 SDGs, across focus areas including health, climate, clean energy, clean water, education and sustainable cities. The UN framework is also adopted by funds including Cbus and Australian Ethical.
Addressing whether chasing SGDs change expectations on meeting the risk-return requirements, Sawtell-Rickson said HESTA “definitely never had that perspective”.
“We take our responsibility to generate strong financial futures for our members very seriously, so that [risk-return expectation] was never going to be something we are willing to flex on.
“What’s been really interesting… is that we’ve got these SDGs, which are aligning with government policy, investment and significant change momentum, which does create naturally demand and opportunity.
“By being proactive in these areas, we feel we’ve actually been a little bit ahead of the curve, and able to build a brand and have access to deals and opportunities that are very attractive financially that others perhaps just didn’t see coming.”
Close to a year ago, HESTA seeded $240 million into specialist affordable housing fund manager Super Housing Partnership’s first fund which focuses on developing a pipeline of Victorian build-to-rent projects.
The idea came from some early “impact incubator” opportunities, where the fund invests on a small level to experiment with ideas, said Sawtell-Rickson.
“Build-to-rent is a much more established market internationally, whereas in Australia, the built-to-rent is really a mum and dad’s market… Institutional developments tended to be units for sale and preferably high end to maximise the returns.”
While it’s easy enough for institutional investors to pile on their capital, Sawtell-Rickson said the real opportunity now is in the long-term.
“Sustainable finance is still really embryonic.
“The idea that we can all have impact beyond just contributing financial capital and use it to help build more sustainable and inclusive economies, which should, through time, really support stronger and more sustainable economic growth, I think, is a real responsibility of long-term investors.”