As part of impactmania’s Women of Impact series, we are traveling to New Zealand in November 2019. A number of the women from the program will meet their peers for cultural exchange and to create economic opportunities and partnerships. The U.S. Consulate in Auckland, New Zealand is supporting 12 interviews and a special welcome reception at the U.S. Consul General’s residence. You are invited to meet and connect with the women from the program at the Women of Impact event, November 8, 2019, in Auckland, New Zealand.
Louise Aitken is the CEO of Ākina, Aotearoa/New Zealand’s leading impact development organization. In addition to leading Ākina, Louise serves on the board of the Impact Enterprise Fund—New Zealand’s first impact investment fund, and she is also a recent appointee to the National Advisory Board for Impact Investing Network Aotearoa.
BY PAKSY PLACKIS-CHENG
Louise, tell me a bit about the Ākina Foundation’s work. Can you give me an example of an initiative with a sustained impact?
As an intermediary, we support enterprises with positive impact in New Zealand. Our purpose is to enable meaningful change by putting positive impact at the heart of the economy. Our vision is a sustainable, prosperous, and inclusive Aotearoa (New Zealand) and world.
There is a huge opportunity here in New Zealand. It is really fantastic, particularly given our focus on social benefits in addition to economic benefits. We are trying to understand how an economy can create social well-being, which enables our people to thrive while also making the planet stronger.
Internationally, the world has started to form a significant part of the financial markets for impact, including here in New Zealand. We raised New Zealand’s first impact investment funds two years ago. It was a relatively small fund, as it is under NZ$ 9 million. What it really enables us to do is to have a conversation about what the benefit of investing in tech for impact. Some recently released data estimates some $889 million of impact investment funds under management in New Zealand. This is only growing and hugely exciting for our economy, society, and environment.
What were the first steps to launch the program?
It was a long time coming. The organization had extraordinary people supporting it over the last ten years as we tried to understand the opportunities and potential for impact investment. We did a lot of work in education, a lot of work in readiness.
Impact investment was new to Aotearoa when we began to raise for our fund. We spent a lot of time talking to potential investors from philanthropic investors to fund managers. Discussion about the potential for impact alongside financial returns. We were really proud to launch the fund which is now in its second year and is actively investing.
What are examples of the outcomes of an impact investment?
We have done two investment so far, and we have a significant number in the pipeline. It is probably a little bit too early to say the results of them. But we are really hopeful that impact will be a significant part of our financial economy over the next 10 to 15 years. Our fund can continue to be a catalyst for this.
The other facet we have accomplished towards creating that market is impact investment readiness. With grant funding, we have worked directly with organizations to get them ready for investment. Through this, organizations can acquire the skills and support they need to be able to complete the investment deal.
It is over 20 to 1 returns on those investments. For every dollar of grant funding they receive, they unlock at least $20 of investment. That is a really big opportunity for us to intersect the market. While the investment itself is really important, the support required to enable the investment to be unlocked is also critical.
How can we create the opportunity for those organizations to get the support that they need to be capable and ready for the investment? And to be able to scale and grow value out of that investment?
What are the ingredients for success? What would the steps be for entrepreneurs to assess readiness?
First of all, you must understand your impact. You must be able to measure. You must be able to logically explain how your work will generate the long-term impact you want to achieve. Then you also need to demonstrate the financial sustainability of your organization. All these elements have to go hand in hand.
When you are looking for an investment opportunity—is it financially feasible? If it is, will the impact scale accordingly? Is the impact something that is required to solve whatever the problem is?
Sometimes it requires providing additional support to organizations that have not gone as deep into that impact management in the framework. They need to prove their long-term impact and benefit for society or the environment.
We use a lot of best practice techniques such as theories of change and impact models to work with those organizations.
Tell me a little bit about the metrics you are using. How should people measure impact?
What we are trying to do in New Zealand is to create a consistent language of impact. We are pretty lucky under our current government. In the last year, our Prime Minister and the current government launched a well-being framework.
It has given us a set of indicators that we can start using consistently. Whether it is through procurement or other activities within government. That is a really exciting development. It will take a long time to be something common, and to implement across our economy, but we are hoping that it will come.
On the other side, we recognize there are some fantastic global best practices, and we want to be able to adopt them here in Aotearoa. We use the Impact Management Project, a framework used by many organizations globally.
It is certainly supported by hundreds, if not thousands, of impact investment funds internationally. It gives us a consistent conversation, regardless of the different types of impact in which we may be investing.
How can we start to create a portfolio approach for impact? How can we start really linking through to some of the most significant social and environmental problems that we have here in New Zealand, but also thinking about that impact of investment globally as well.
What are the main challenges? Is it educating investors to recognize the positive financial and social return on impact investments? Or is it more the lack of social entrepreneurism? What are some of the hurdles in New Zealand?
Yes, it is like any growing market. There are always challenges and opportunities on both the demand and supply side. From the investor’s side, the latest reports on impact investing in New Zealand are really encouraging.
The investors already investing in impact are either achieving or exceeding market return. That is fantastic. It shows you do not have to discount for impact. It can be achieved if it is done right.
From the evidence reported, investors are thinking about a six-fold increase of what they will invest as impact funds under management over the medium term. We should be seeing over $5 billion for impact investment funds under management in the New Zealand market in the next five to ten years.
What that means is, of course, we need to ensure we are building the capability of the investable organization. How can we support impact enterprises from their earliest stages, through significant scale and growth? As a sector, how can we all be tied together, because we have one small fund?
The New Zealand government announced another NZ$300 million into a VC fund, following their investment of NZ$100 million into a green fund. These are all really important tech forms of capital, but they need to be available at the right time for those organizations with the right capabilities for support. As organizations start to value their impact, they need a lot of support to be able to articulate their impact, to understand what is good impact, and to best utilize the support available to them in order to continue increasing their impact.
It is not just good enough to say, this is the impact I am making. It involves finding ways to scale the impact in order to create greater opportunity and deliver solutions. We definitely need the capability on both sides. We need to celebrate when we have great case studies.
We need to work across the whole picture to develop this really important part of our financial economy here in New Zealand. It is slowly coming. We have received huge interest from government, from the philanthropic sector, from the mainstream investment sector, as well as obviously from entrepreneurs who are wanting more and more to provide solutions for the social and environmental challenges they see.
I have interviewed many social entrepreneurs around the world. It is hard enough to have a return for a business to stay alive. For impact investing, we are also asking these companies to have a solid scalable demonstrating the impact. That is a tall order. We all want to generate positive social impact, but it is not an easy thing to deliver. Of the many, many social entrepreneurs I have interviewed, there is a high percentage who ended up doing something else. What do you say to social entrepreneurs?
Without a doubt. You have financial models: what do you need to be a successful business. Then you have your impact model: what you need to be significantly impactful. If not doubly hard, it would be quadruple hard to be able to deliver both of them. With entrepreneurs who are at the earliest stage, it is difficult to really think deeply about what problem they are trying to solve. Is the market the right place for that solution? If it is, what are the financial elements you need to have in place? How can you, as a founder, ensure you are looking out for yourself?
All of those elements are important. Sometimes, if you take the eye off one of them, the whole thing falls apart. The unintended consequence is the person who has been benefiting from your solution can sometimes be worse off.
A lot of the work we do involves asking tough questions of the social entrepreneurs, the people so driven by impact and passion. We ask them to analyze the system. What is your problem? Are you the right person to solve it? Why and how? Do you know people who experience that problem? Go, find them, and ask what solutions they think they need. Involve them in the creation of that solution. When you are creating a traditional business, you are not necessarily thinking about what positive impact that you want to have for somebody else.
It can often take one tough question to unlock a different solution. You might need, for example, to partner with another organization.
It is about deeply understanding the system and its inherent problems. Next, finding a sustainable solution that will have significant impacts.
We have seen extraordinary social entrepreneurs who really struggled to say, how do we make it financially sustainable? How can we ensure the long-term impact and understand the short-term outcome?
With the right support, with the right ecosystem of understanding and valuing impact, we are getting better. We have more people in traditional finance and professional services organizations who understand impacts in a different way than maybe five or six years ago. The banks might ask you a different question today than what they did two or three years ago.
We are really lucky in New Zealand to be at the moment to unlock broader outcomes. The government attention on impact investing is probably very progressive. Governments spend a lot of money procuring goods and services. When government entities are purchasing from organizations, which are delivering wider features, whether it is through social inclusion, employment outcomes, or neutral or positive environmental impacts. This contributes to the solutions that we all need for our people and planet.
You mentioned corporations, and obviously corporations have a huge impact, good or bad. What are steps corporations could take to become more sustainable?
We try to tie the heart of every business to a successful impact strategy. We want to walk alongside and say, in order to be successful, what is the impact you can achieve that to benefit your business, the community, and the planet?
We are asking different questions, particularly around adaptation to climate change. What are they doing to mitigate the risks of today’s commercial business?
Today, consumers have more data than ever before to make informed decisions about their purchases.
People want to work at organizations that are aligned. What are you doing to contribute positively? What are you doing to reduce the negative impact that you may have had in the past or may continue to do? That is a really important journey for organizations to embark upon.
Even if an organization fosters a positive social environment, can they raise the capital they need? Can they recruit the employees required to be successful? Can they retain and grow a consumer base by articulating value alignment to their customers? Then you have the other big component: the regulators, the government, which are now asking better questions about the role of business. It is a really exciting moment for New Zealand.
How about the government’s role. Is there one regulatory advance governments should undertake that would make a big difference?
We are pretty unique in New Zealand. We are a small country. We have indigenous populations in New Zealand who have been delivering social impacts to their communities and planet since they started trading. But we still have some significant social and environment issues we need to address.
We are governed by a founding document, Treaty of Waitangi. It states we inherently have value in the way in which we work in partnership with our indigenous community.
We want to build a solution that demonstrates what can be done. We are also looking at how can utilize the legal structures currently in place in New Zealand.
Impact will come if you value impact within those legal structures. That is probably going to look quite different in other countries. We have the opportunity to learn from their successes and their failures. We get to make it uniquely New Zealand. We are a unique country, and that is important for us to recognize.
How do you make sure that all the departments of the country focus on this? As you mentioned, it is usually one department, such as corporations. One group is tasked within one division that seldom goes across the board.
Certainly. There is our Minister of Finance. It is hard to ensure impact investing happens from an allocation standpoint.
The Prime Minister has had a lot of conversations around the importance of well-being. I think we are one of the first countries to think about well-being as a part of the country’s financial mission. That is pretty exciting.
It is certainly not without an issue, because it is such a significant change. It will take probably a good ten years to be fully implemented. It is an exciting opportunity for us to think about what resilience is.
It has given us an opportunity to have a different conversation. It is prompting a different perspective of social responsibility. We are excited by what the future holds.
Meet Women of Impact New Zealand in Auckland, November 8th, 2019.
impactmania’s Women of Impact program has been awarded with the U.S. Embassy Public Diplomacy grant. The grant supports 12 interviews with women in New Zealand who drive cultural, social, and economic impact. The Program also includes a week-long visit to New Zealand to connect and collaborate with those interviewed by impactmania.
For more information: paks[email protected].