|
|
|
|
Impact Investment WA Alliance urges McGowan Government to support the emerging sector amid coronavirus crisis
The West Australian (23 June 2020)
Proponents of impact investment are calling on the State Government to support the emerging sector, saying a lack of leadership is hindering progress despite a huge appetite for investments that have positive environmental or social outcomes..
Click to view article on: Linkedin | Twitter | Facebook or view accompaniment piece here.
|
|
State Government Carries 'Old Economy' Risk into the Post COVID World
Trying to get back to business as usual without investing in the transition to a new, inclusive economic model creates a substantial risk to the WA economy. To be clear, nothing should go back to normal. Normal wasn't working.
(click to view article online here)
"For the first time since we started tracking ABS data (1978), the number of young people outside the labour market is over 40%. This is not normal fluctuations or seasonal adjustments - it is an absolute crisis" (source: Shirley Jackson, Senior Economist, Per Capita https://percapita.org.au/
As WA emerges largely unscathed by the health crisis, a much darker social and economic crisis is looming with the approaching financial cliff in September.
Between now and September millions of recipients of JobSeeker, JobKeeper, HomeBuilder, mortgage deferrals will progressively fall through the social security safety nets erected by Federal, State governments and regulators. An abyss of job losses, thousands of business and mortgage foreclosures, long term unemployment and social upheaval awaits
The problem: As mortgage stress skyrockets in the late stages of a housing bubble, consumer spending dives impacting tax revenues (and governments holy grail of GDP). At the same time, the forecast upcoming wave of business collapses relegates staff to the dole queues or casual work, simultaneously eating a large chunk of the government tax revenues from these sources just as demand for social services spending spikes.
The outdated solution (to date): The answer has so far been to perpetuate an economic stimulus and tax cuts model that was unsustainable and extractive long before COVID. The fiscal measures governments at all levels typically go to during economic crises have not served us well in the past and are proving increasingly ineffective in an economy that doesn't serve all stakeholders. These include:
- Company tax cuts are often argued as a way to ensure company tax revenues stay in Australia along with jobs. This is a race to the bottom. These cuts have not been evidenced to create jobs and they don't prevent offshoring of entire industries. Instead they give rise to share buybacks and higher shareholder returns.
- Payroll tax cuts may provide a limited cost saving for businesses, stalling lay-offs, but are unlikely to create new jobs in the long term.
- Personal income tax cuts and cash splashes have a limited impact on increasing consumer spending in aggregate (except in the case of low income earners such as the case for raising Newstart/Jobseeker). When consumers are overburdened with household debt and under/unemployment tax cuts typically go to service debt
- Stimulus and removing development approval processes for 'job creation' in legacy industries such as fossil fuels add nothing but risk in terms of future stranded assets and environmental catastrophes.
Companies in the old economy prioritise shareholder profit, so thinking that they might now do otherwise when public money is being thrown at them is an absurd distortion of reality by governments who are either out of original ideas, or beholden to donors, or both.
We are staring down an effective 15-20% unemployment rate in WA with myriad long-term social consequences for families and communities. These are challenges which these traditional government, economic and business models is ill equipped to address.
What Does 'De-risking' Look like for our State?
The above from Griffith University's recent report exemplifies the key elements of building a new economy post-COVID *Source: 'Seven Domains of Action' - Griffith University Yunus Centre, Roadmap to Recovery & Regeneration - Opportunities for a post-pandemic recovery that creates better futures for all.
As a new economic reality emerges from this COVID crisis, impact investment and social enterprise sectors stand ready with the capacity to address some of our most intractable social and economic challenges, through the power of impact-driven business models, eventually easing the burden on dwindling government coffers.
When a business has job creation that addresses social disadvantage as its primary reason for being, you get jobs and new industries as a concrete outcome, and government social spending upsides in the long term. This is what employment-based social enterprises are all about.
Creation of a State Impact Investment and Social Enterprise Strategy is an opportunity for the State Government to take a ‘best-practice’ policy leadership approach, already implemented in other Australian states, and countries like the UK and Canada a decade ago, and actively participate in the development of the social enterprise sector in our state.
Let's consider what the Western Australian Government could achieve for communities by supporting this kind of social innovation*:
- Social procurement - targeting procurement from WA's social enterprises - creates jobs, incentivises economic diversification from the private sector and leverages corporate purchasing power for social good
- Social enterprise support - catalyses new WA businesses and industries that exist primarily for the communities they support, and creating value
- Impact Investment - catalyses WA business investment that builds a new economy which places community, employee and environmental impact outcomes on an equal footing with sustainable financial returns.
We may have done well on COVID cases, but going into the second half of 2020, close to the end of the current State Government’s four year term, we have now had a massive COVID economic impact; We’ve had climate impacts and fires; Destruction of cultural heritage and continued environmental degradation. All the while the economy has stagnated and is now going backwards with the highest rate of job losses in the country. Trying to get back to business as usual without investing in the transition to a new, inclusive economic model creates a substantial risk to the WA economy.
The economic value and social impact of local manufacturing and jobs through employment based social enterprises in particular cannot be underestimated at this time, or at any time in the future. COVID19 is showing us that. These businesses create resilience in the system. The Government must move forward onto long term funding in this sector that builds capacity within our communities and industries for regeneration and economic diversification.
- A diversified economic system with re-localised production of value add goods
- Investment in inclusive social change through employment based social enterprises;
- Developing resilient, regenerative, social, circular, local economies;
- Supporting local and social procurement and business.
Social enterprise, social innovation and impact investment was made for our time.
We have had a WA Impact Fund, the WA Impact Investment Alliance, and the WA Social Enterprise Council comprising some of the greatest leaders across private, philanthropic, finance, business and social sectors in WA making the case to State Government for impact investment policy.
The time has run out for the State Government to talk about impact investment and social enterprise. It must now act.
(*Source data and policy recommendations available here)
What next?
|
|
Three 2020 State of the Sector Reports Released in the Past Weeks Offer a Local, National and International Perspective of Impact Investment and a post-COVID Context
A Local View - Yunus Centre Roadmap to Recovery + Regeneration Report
This excellent and timely report from the Yunus Social Business Centre at Griffith University offers a roadmap to a more inclusive economy in a post COVID world, with seven implementable action areas for policymakers and all sectors.
"Recovery from the coronavirus pandemic will demand ‘the most ambitious fiscal rescue of modern times’ (Experimental Treatment, 2020). Beyond mitigating the immediate impacts of the pandemic, stimulus packages will also determine social and economic outcomes for years to come. In this sense, the characteristics of response strategies now, open up possibilities for very different futures." (Griffith University Yunus Centre - Roadmap to Recovery + Regeneration report, June 2020)
National View - The 2020 state of the market report from the Responsible Investment Association Australia
Australia's impact investment market is set to skyrocket over the coming years, with new research predicting the market will reach $100 billion by 2025. (Benchmarking Impact 2020 report from Responsible Investment Association Australasia (RIAA))
Global View - The 2020 Annual state of the market report from the Global Impact Investment Network is now in its 10th year
The 2020 Annual Impact Investor Survey is the 10th edition of the Global Impact Investment Network's flagship report, which provides the most comprehensive overview of the impact investing market which now sits at $715 Billion USD market size. The report looks at respondents’ investment activity during 2019 and their plans for 2020, market developments over the past decade, and challenges facing the market going forward. Respondents also shared insights on how COVID-19 might affect their activities, climate investing, catalytic capital, the evolution of impact measurement and management practices, and policy developments over the past decade.
|
|
Our Top Articles & Opportunities of the Month
We’ve trawled the innards of the internet to bring you a curated look at the world of impact investment, innovation, social enterprise, as well as some opinions, critical thought and reflection.
- "Centuries of systemic racism have brought us here. Racism that is deeply ingrained in an economic system that privileges shareholders over stakeholders and a political economy that has hollowed out and abandoned so many urban, rural, and tribal communities. As impact investors we must question our own complicity in the division of power, access, and wealth. Doing so will prepare us to step in and step up, taking the actions that will help move us toward our shared goal: social, economic, and environmental equality and justice for all" (US Impact Investing Alliance)
- The more we rely on common impact measures, the more we end up compromising the meaningfulness of social impact measures themselves. This is why measurement alone cannot solve the comparison problem. (Stanford Social Innovation Review)
- Australia's 7 state and territory social enterprise networks have united to build a common vision for a better future and form a new national voice for the social enterprise sector – launching the Alliance of Social Enterprise Networks Australia (ASENA).
- Great provocation piece from Ingrid Burkett and Alex Hannant at the Yunus Centre, the reflection on impact innovation particularly resonates "Moving beyond financial innovation into impact innovation. Impact investment in Australia has been dominated by a ‘banking’ mindset, whereby the focus is on growing and structuring the supply of capital, and the orientation is set towards the investor rather than the impact. To shift this, we need to start to reverse-engineer from impact back into investment rather than the other way around"
- "It is no wonder that investors get confused in the Responsible Investment Sector when even magazines like Forbes incorrectly mixes and matches terms like ESG, sustainability and impact. To suggest that ESG means “environmental, social and governance-minded” and involves “setting aside pure profit motives and investing in companies that are good to the environment, their employees and their shareholders” is simply wrong.There is a significant difference between fund managers and funds incorporating ESG into their investment processes and those which are deliberately tilted to deliver to substantiality or impact objectives. Articles like this that further confuse these issues does the industry no good service" (Tony Adams on this Forbes article)
- From this great podcast with impact investment veteran Fran Seegull: "In the mid 1990's women entrepreneurs received 2.5% of VC. Today its 2.2%; The misalignment between the 5% of foundation giving while investing the 95% of corpus without regard for impact; Exploring for profit social entrepreneurship..These were some of the things that spurred this impact investment pioneer on to a career where today in her own words "the market is rising to meet us". Some interesting reflections in this podcast from Fran Seegull, Executive Director of the US Impact Investing Alliance "Folks want to understand about growth, and they want to understand about impact washing, and how to measure impact.. There are 9 or 10 private equity funds with multi-billion dollar funds gathering assets, surfing a wave that has been built over decades by precious grant capital, and we feel like folks should fund the rails that they ride on when they deploy capital..there needs to be some accountability. When we think about what makes markets move, its transparency, accountability, and access to data. We'll look to see whether those CEOs and corporations rise to the challenge"
- Global Impact Investment Network launches Impact Investment Coronavirus Taskforce. Made up of a number of high profile networks, including B Lab, the US Impact Investing Alliance, the European Venture Philanthropy Association (EVPA), the Response, Recovery, and Resilience Investment Coalition will identify opportunities to invest in health interventions and access to capital, and will direct new capital to fill coronavirus financing gaps.
|
|
We only email you once a month or less, but there's lots more going on at our social media pages, and we'd love you to 'follow' us there on the links below (especially Linkedin..thanks!):
|
|
|
|
|
|
|
