Invest for impact: how to leave this world better than we found it

Bill Murphy, who heads Purpose Capital, is at the coalface of impact investing. He tells me about mussel farming out on the ocean near Ōpōtiki, solar ‘agri-voltaic’ panels, homes for tamariki and alternative refrigerants used on dairy farms, all of which have benefited from money from Purpose Capital’s $22 million first fund. 

“If you took just a kilo of refrigerant, it produces the same global warming as 3,500 kilos of CO2,” Murphy explains. “They are big, big baddies in terms of climate emissions.”  

To make an impact, he’s found a company to invest in which has developed cooling systems for dairy farms that use less-harmful refrigerants, much lower volumes, with greater assurances that they’re not leaking into the atmosphere. It’s an opportunity for a new long-term model. “That’s what rings our bell,” he says. 

And the financials? The refrigerant company will lease units to farmers, avoiding significant outlays for them. Purpose Capital’s first fund aims for a 6% net rate of return, but has been tracking even higher due to it holding more equities than bonds than anticipated. (Turns out you can grow money and do some good at the same time.) 

Investing ethically is a personal thing; it depends on what you value. If your fund manager mentions sustainable or ethical investing, you want to make sure that their ‘ethical’ matches yours.  

What do people care about most when they’re aiming to make a positive impact? Again according to Mindful Money, here are their top five: healthcare (76%), healthy rivers and oceans (76%), sustainable water management (74%), renewable energy (74%) and biodiversity (74%). And people’s interest investing in these areas has continued to rise. 

Could impact investing work in KiwiSaver? “Absolutely,” Murphy says. “To provide clients a diversified portfolio and meet their need to make a difference, KiwiSaver funds should include funds like Purpose Capital. Investing directly into growth or private equity stage companies and projects is riskier than investing in the sharemarket.”  

“Wouldn’t it be great for providers to be able to say someday, ‘Your money has just gone into employing 170 people in Ōpōtiki.’ That’s gold.” 

Another route could be for an investing platform to offer an impact fund or ETF for us to invest in, again with the goal that it would make up a small portion of our overall holdings. Though small money from individuals, collectively those funds would make meaningful change on the ground. 

How might the future look? Murphy would like impact investing to be an everyday thing. “I’d like to see the term ‘impact’ disappear, where everything we do in investment is not just about the financial return — it’s also about what we can return to society and the environment.”  

“Someday my granddaughter, she might look at me and say, ‘I can’t believe that your generation used to work and invest only for the financial return. That’s crazy!’” 

Murphy evidently has found a purpose for capital, and his own personally along the way. “It’s not enough, given the climate crisis, but it’s hugely rewarding,” he adds. 

But we are still some way from joining efforts such as his through our KiwiSaver funds. Check with your provider to find out what their ethical stance is.