ART to commit $2bn to impact investing by 2030

Australia’s second-largest super fund is prioritising impact investing with a $2 billion commitment, targeting assets that deliver a combination of financial, social, and environmental outcomes.

Australian Retirement Trust (ART) said this week it has set a 2030 target to deploy at least $2 billion into impact investing, signalling a major expansion of its strategy to align financial returns with measurable social and environmental benefits.

The fund has made a significant step towards this milestone by committing almost $1 billion to the Macquarie Green Energy and Climate Opportunities Fund (MGECO).

MGECO includes Australian and international assets, such as Aula Energy, which has active projects in Queensland, South Australia, and Western Australia, headlined by the Boulder Creek Wind Farm near Rockhampton.

Nicole Bradford, ART’s general manager of sustainable investment and planning, said the move reflects the fund’s belief that impact investing can be scaled into the mainstream.

“As a large investor with globally diversified portfolios, we have recognised that some of our investments can serve a dual purpose, delivering financial returns and seeking to make a positive difference,” Bradford said.

He explained that while climate change is often viewed as an investment risk, it also represents an investment opportunity, particularly as Australia seeks to transition to a low-carbon economy.

“Investors like us have demonstrated how the capital we steward on our members’ behalf may contribute to the solution,” Bradford said.

He highlighted the potential for large investors to scale up impact investing beyond niche opportunities.

“Scaling impact investing has been challenging; many opportunities have been too small or fragmented for institutional capital,” he said.

“With our size and long-term investment horizon we have helped bridge this gap and shift impact from niche to mainstream.”

Data released last year by American Century Investments highlighted a sizable decline in the appeal of impact investing, with Australia reported to have suffered the greatest decrease compared to its global counterparts.

Namely, interest in impact investing among Australians slipped in 2023, with 57 per cent finding it appealing in December, down 6 points from a year earlier.

More recent data from Australian commercial law firm Clayton Utz, published in March, highlighted rapid global growth in impact investing, which now exceeds US$1.5 trillion, while Australia’s sector remains “nascent”.

The report showed Australia’s impact investment market expanding from $30 billion in 2021 to $78 billion in 2023 – a 260 per cent jump – and predicted growth to around $500 billion by 2025.

Historically, institutional investors in Australia have faced structural constraints on allocating capital to impact or energy transition investments, as benchmark-driven mandates and regulatory frameworks like the YFYS performance test limit off-index positions and introduce additional performance risk.

Recently, the Treasurer announced the government intends to review the performance test to remove “unnecessary obstacles or impediments” to institutional investors investing in areas where there is clearly a national need.

ART targets $2bn impact push beyond climate

ART’s $2 billion commitment is just the “start of our journey”, Bradford said and added that the fund’s focus extends “beyond just climate change” to possibly include assets spanning health, social housing, and aged care.

Michael Weaver, ART’s general manager of mid risk assets and UK, described MGECO as a “unique investment opportunity”.

“MGECO will initially target investment opportunities across solar, onshore and offshore wind, and batteries in OECD countries including Australia,” Weaver said.

“To the extent that commercial scale has been achieved, it has also targeted other technologies such as hydro and geothermal, bioenergy and energy storage, or natural climate solutions.”

According to Weaver, the primary investment objective of MGECO is to make “equity and equity-like investments in a diversified portfolio of sustainable infrastructure, real assets, and businesses”.

“At a local level, we have been excited about MGECO’s investment in Aula Energy, an existing portfolio company of MGECO,” he added.

“We have looked forward to working with Macquarie Asset Management through MGECO to deliver returns for our members while seeking to generate measurable environmental benefits.”