Increasing investor interest, evolving data capability and rapid advances in markets are aligning to create the conditions for a growth surge in impact investment in New Zealand, Chapman Tripp says.
This is the central theme in the firm's publication, released today, Impact investment – trends and insights.
Impact investment takes many forms – green bonds, social bonds, social enterprise, environmental, social and governance (ESG), ethical funds management, as part of strategic philanthropy and more. It shares a common organising principle, which is to generate social and environmental benefits as well as a financial return.
The Government's decision to move to a Wellbeing Budget that reports against a broader set of indicators than economic growth and seeks to promote social wellbeing and environmental values in budget decision-making, can be seen as part of the same phenomenon.
Chapman Tripp's predictions include:
- fast-growing demand for green bonds, in line with Australia
- an increased focus on 'strategic' philanthropy through which philanthropists and foundations engage with their targets, applying expertise as well as money toward the achievement of explicit social or environmental goals, and
- increased demand for responsible investment products by consumers and investors.
"The potential for green bonds to really take off in New Zealand is backed by a number of factors," Chapman Tripp finance partner Ross Pennington said.
"Key among them are: the Productivity Commission recommendation for meaningful emissions pricing, the increased commitment to ESG reporting in both the public and private sectors, New Zealand's large infrastructure pipeline, and more sophisticated financial sector delivery instruments.
"It's not so much that green is going to explode (plainly it will), but that we're not that far away from a world where brown is going to become an endangered species," Pennington said.
"This is investor driven, and the arc of that sentiment is not going to change. Directors in the not distant future are going to have to start thinking about the resilience of their funding arrangements for brown assets and the risk those assets might get stranded, at least as far as the bond market is concerned."
Chapman Tripp special counsel Phillippa Wilkie, specialising in private wealth and trusts, added, "New Zealand has some leading proponents of strategic philanthropy, and the social enterprise sector is also growing rapidly.
"We think these trends will continue as philanthropists and foundations look to maximise the social or environmental benefits of their investment, learn from each other and tap into international best practice.
"Organisations and individuals are focusing to a greater degree on positive social and environmental change resulting from their investment in addition to, or instead of, a financial return.
"This is a powerful movement for New Zealand."
Read the publication here.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.