The $330 billion Australian Retirement Trust (ART) is understood to be considering a landmark multi-billion dollar allocation across the impact investing sector, which could finally kickstart the fledgling local industry.
It would mark a breakthrough among large Australian institutional asset-owners, who have long held concerns around investment performance. Others have struggled to implement the strategy across disparate investment teams or scale up the strategy across small and highly specialised products.
ART’s plans for impact investing – which aims to deliver returns as well as positive social change – were widely discussed among attendees at the recent Impact Investing Summit in Sydney.
However, an ART spokesperson declined to comment on specific decisions, instead referring to the fund’s 2023-24 sustainability report.
“Our approach to sustainable investing is guided by our duty to act in our members’ best financial interests, and as outlined in our 2024 Sustainable Investment Report we’re working on an impact investing framework,” the spokesperson said.
“We’re making progress in developing our impact investing capability and are aiming to have an update for our members later in the year.”
The report, published in October 2024, said progress in developing its impact investing capability had been slower than initially planned. Its impact investing governance framework was set to be approved by December 2024 – one year after its initial December 2023 target.
Meeting institutional concerns
While definitions vary, the impact investing sector has been estimated at $US1.571 trillion globally, based on Global Impact Investing Network (GIIN) numbers. However, the local sector has struggled to gain mainstream acceptance among large institutional investors, with a government-appointed social impact investing taskforce calling it a “cottage industry in need of support to scale up”.
A key challenge has been gaining the buy-in of each individual asset class team. A top-down implementation approach has often hit hurdles with teams already incentivised with their own performance targets.
In 2019, Cbus Super pledged 1 per cent of its portfolio to dedicated climate-change investments. In 2023, it re-absorbed all investments within the 1 per cent allocation back into their respective asset classes, stating that it had far exceeded that initial goal.
Rest Super may be the most high-profile proponent of local institutional impact investing, drawing a direct line between the strategy and the future needs of its more than one million members under the age of 30.
Since 2022 it has backed a range of managers offering impact investments across asset classes including infrastructure, private equity (healthcare), global shares, alternatives (sustainable agriculture) and property (logistics).
However, most other impact investing forays have been sporadic with asset owners also facing challenges scaling up niche strategies that still align with their values.
For example, in 2019 HESTA took part in a $20 million project to build apartments, with some set aside to house nurses, who comprise most of the fund’s members. However, such investments take considerable time and resources to set up but are too small to affect overall returns in a fund managing tens of billions of dollars.
The question of returns
Australian asset owners also remain wary about investment returns in an increasingly politically-charged environment, including across the related ESG landscape. In March 2025, UniSuper rejigged its Global Environmental Opportunities investment option, broadening its investment universe, given volatile investment returns.
Impact investments have an even more precarious balancing act than typical ESG investments. They must meet investment return targets, as well as deliver on specific and measurable social or environmental targets, to be successful.
More government support would help offset investment risk, as commonly occurs in the infrastructure sector. The government’s Social Impact Investing Taskforce recommended a $200 million Impact Investing Wholesaler to act as cornerstone investor, which would attract more institutional support (similar to the role played by the Clean Energy Finance Corporation in the climate sector).
While that recommendation was not acted on, it is understood a variety of similar models are being discussed among political parties in the lead up to the May 2025 election.
Asset consultant Frontier has argued that asset owners should also broaden their impact lens to include a wider range of potential investments, including looking offshore, to achieve their goals.
Until that step change, it is smaller asset owners, such as family offices and charities, that continue to lead the charge with niche impact investments.
