Selective opportunities for impact investing

There is nothing to stop superannuation funds from directing asset allocations towards so-called “impact investments” but, ultimately, they are only likely to do so if they believe it is in the best interests of their members.

That is the bottom line of an Association of Superannuation Funds of Australia (ASFA) submission responding to a Federal Treasury discussion paper on social impact investing.

The submission has effectively countered suggestions that the sole purpose test might preclude impact investments on the part of superannuation funds, but points out that trustees are likely to take a highly pragmatic approach.

“ASFA considers that the current legislative framework for superannuation funds is not a barrier to superannuation funds investing in impact investments,” the submission said but pointed out that trustees clearly understood that their primary purpose was to “deliver retirement savings to fund members”.

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The submission said there were barriers to superannuation funds investing in impact investment assets with some of those barriers relating to the inherent nature of markets that are in the early stages of development.

It said the main barriers to superannuation funds investing in impact investment assets included:

• Lack of large-scale, investment-ready opportunities;
• The relatively high cost of impact investing (on a per assets basis);
• Lack of expertise on impact investing within funds, and the lack of well-developed intermediaries that would reduce the need for internal expertise; and
• Lack of good quality data on the performance of impact investment assets and on the outcomes of government services (which makes it difficult for funds to assess the viability of potential impact investments).