Bill Murphy (pictured left) says the challenge now is to find the right projects to begin investing in. Mark Ingle (pictured right) says a typical recipient of the impact funding is likely to be generating income and looking to fund growth.
Investment fund aims for community good.
The Tauranga-based Purpose Capital Impact Fund has reached its first close target of $20 million, with WEL Energy contributing $5 million.
With a focus on social and environmental problems, potential opportunities could include regenerative agriculture on dairy farms, urban transportation, green housing and social housing.
A typical recipient is likely to be generating income and looking to fund growth, perhaps with a technology it believes is scalable, said WEL Energy Trust chair Mark Ingle.
“It’s businesses that will potentially create jobs in higher needs areas, so there’s a social benefit associated with this business being located there,” Ingle said.
“It could be businesses that are early stage in testing new technology which, if successful, will provide benefit. So there’s a potential risk associated with it, that your traditional investors or certainly your banks wouldn’t touch.”
The concept of impact investing is still new in New Zealand, he said.
“The main reason that we’re supporting this one is because we invest currently offshore, as a lot of foundations do, and we’ve said, well, why wouldn’t we be investing in something that provides a yield, but also a social or environmental benefit?
“The way for us to challenge the traditional investing is for us to put our money where our mouth is and get in behind something.
“Purpose Capital is the first of what we would expect to be further funds of that type, some of which will have a specific regional focus.”
The $5 million commitment will be invested over several years, as Purpose Capital finds businesses to assist, and the trust is set to take a lower rate of return for the sake of the benefit to the community. It will continue to hold a diversified investment portfolio.
The fund was launched in March by Bill Murphy, founder of Enterprise Angels. Along with WEL, it has attracted the Tindall Foundation, K1W1, BayTrust, TECT and private individuals and family trusts as investors.
It will remain open for further investment and is aiming to reach $30 million. It will focus predominantly across the central North Island but will consider investments outside that area.
Murphy said he was inspired by the success of impact investing overseas and felt he was well placed to introduce the concept here.
“I felt very excited and somewhat intimidated by the opportunity to be part of getting it going in New Zealand,” he said.
“It’s been a great challenge but the commercial sector are very open to the idea of impact investing. They firmly believe that taking commercial business and investment disciplines and applying those to social and environmental change will yield results.”
Fund directors include Gallagher Group executive chair Steve Tucker.
The challenge now is to find the right projects to begin investing in, Murphy said.
“Given the immaturity of the eco-system for impact investing in New Zealand, we are having to go look for opportunities and help shape those for investment. We can’t simply sit back and wait for things to come to us. We have to be aware of aspirational social and environmental changes out there and engage with them.”
The philanthropic sector, and the contacts they have, will be invaluable in this regard, he said.
WEL looks for systems change
The WEL Energy Trust investment in the Purpose Capital Impact Fund comes about four years into a new strategy, trust chair Mark Ingle said.
“The strategy that we’ve developed is really about, if we’re going to invest money in the community, how do we make it as meaningful as possible?”
He said the way to do that is take a leadership role and invest or grant in ways that create systems change for better outcomes.
“It’s an ‘and’ strategy, not an ‘or’ strategy.” he said. “If you’re not investing in [changing]the system then you’re not going to achieve any long term change.”
That also sees WEL take a central role in the Waikato Wellbeing Project, which aims to establish a set of sustainable development goals for the region, as well as the trust being instrumental in the establishment of economic development agency Te Waka.
When it comes to grants, with about $4.5 million to disburse annually, the trust is similarly looking for impact with its community grants.
It is also offering separate vital impact grants for projects around housing affordability, availability and quality. “We’ve got a $500,000 fund, which is by invitation. People give us a one-pager about their project, and it has to be focused on systems change so it has to be at a higher level, has to show there’s collaboration across different groups, and it’s about removing silos to say, actually, how are we all working together to find sustainable solutions?”