Martin Wiseman: Investing with real impact

Martin Wiseman. Photo / Supplied

COMMENT:

I have an investment suggestion for you, a very worthwhile tip about where to put some of your hard-earned money. What's the likely return? I will get to that.

In a world which plainly needs all the philanthropy it can receive, impact investing is trending. On the face of it, this is a laudable idea. It's ethical, but not the same as ethical investing, where you may eschew having your money assist fossil fuels exploration or the manufacture of armaments and munitions.

With impact investing, you choose companies which are not only not doing bad, but are actively doing good, making a difference in the world, supporting causes dear to your own heart. And you get a proper return. The whole point is investing, not just giving. The company's (or organisation's) social and environmental performances can be measured alongside financial performance.

If you're seeking a 7 per cent ROI you might be lucky and get one, or you may be quite content to settle for 2 per cent, knowing that your money is working for you and for the wellbeing of the planet and the people on it. It can be satisfying knowing we're doing our bit for renewable energy, social housing, or more sustainable farming. Even the Catholic church, for example, has benefited from impact investing, even though it owns land with a total area greater than the size of France.

Another way of looking at that 2 per cent-return-when-it-could-be-7 per cent, is to invest more traditionally – to go for the higher reward in any reputable company, and simply give 4 per cent or 5 per cent of the return away yourself.

Because although impact investing does good on your behalf, it also threatens philanthropy. It may be a zero-sum outcome. The charitable sector loses money, the investment sector gains it.

Part of the reason charities struggle for funds, many of them, is that people have lost a certain amount of trust in the whole "giving" idea. There are charities that patently look after their own needs first, and impact investments often seem to have better accountability. This problem is now being addressed.

In future, new financial reporting standards will require auditors to report on real, measurable achievement. Philanthropists (rightly so) are increasingly demanding that charities assess and report back on outcomes in a quantitative way or they won't make donations.

Long story short, the charitable sector is cleaning up its act. As the chair of the Starship Foundation, which fundraises for our national children's hospital, this is welcome news. We need public confidence in what we do at a time when a preference for impact investing is possibly impinging on a vital mission for us.

This is the investment I mentioned, and the need for it will soon become urgent. More than 1.25 million New Zealanders are aged under 16, but there is only one paediatric intensive care unit (PICU) dedicated solely to them, and it is under more and more pressure. Staff are setting up beds between beds to fit more children in. Seventy per cent of admissions are emergencies, cases are becoming more and more complex, the stats make fraught reading; but one statistic shines - 96 per cent of children in the Starship PICU survive. By 2021, though, it will be running at a critical level every two days. Currently, critical levels are reached every five or six days.

Expanding the size of PICU is a major goal, but right through Aotearoa the Starship reaches young Kiwis. Last year there were 27,000 inpatients, 60 per cent of them outside Auckland. Some of them are our most desperately ill children, and their surgery should not be postponed.

"Investing" is a very old word, and originally it meant to endow with importance. These days money is usually involved, and the word has lost its original status. What happens inside the Starship deserves huge status; it's a round-the-clock, no-frills commitment by medical professionals working at the top of their game. The children whose lives are saved and repaired will grow up and make substantial contributions to New Zealand society.

You won't see that return on your bank statement, but you'll know it's there: in every park and playground and school. It is hard to think of an investment with greater impact than that.

- Martin Wiseman is country managing partner at DLA Piper.