Oy Cheng Writes:
The Australian Government seeks to create impact investment funds to enable profitable capitalisation of natural assets and have released a discussion paper Discussion Paper Social Impact Investing (January 2017) on their view how to support the growth of this market.
The 2015 report on Impact Investing in Australia’s surveyed active social impact investments as of 30 June 2015 finding that the aggregate value of the 15 products surveyed was $1.2 billion. At this point, the market was dominated by green bonds ($900 million total).
By 2016, Impact Investing Australia has identified that the demand among local investors for social impact investing over the next five years as grown to at least $18 billion.
With such large demand to participate in impact investing there is a need to verify activities of the investment fund to confirm the activities of the investment. Throughout the Government’s recent discussion paper, there is no discussion of the need to conduct third party verification or certification audits of either the investment fund itself or the activities of the investment (i.e. the impact).
For any financial instrument available on the market, APRA and ASIC has stringent regulatory requirements for financial reporting, data verification and audits, however, the same standards does not seem to apply to the independent verification of impact claims. All too often the claim of increased or successful impacts are justified by data provided by the teams involved in the development and management of the business and associated impacts, which have not been externally verified.
The increasing rise in demand for impact investments to be used as a mechanism to raise funds for social improvement project (such as the Murray-Darling Water Fund), and the nature of impact investors, makes it necessary to ensure robust systems are established to confirm the quality of impacts, and allay investors’ concerns relating to the efficiency and effectiveness of the fund. It’s a question of managing risk through robust systems.
Zoic Environmental is a specialised environmental and sustainability consultancy, experienced in due-diligence and compliance assessments of corporations and their supply chains. For more information, go to www.zoic.com.au.