(Pictured: Matt Christensen)
Australian developments in the social impact investing space are drawing the attention of global investors.
Matt Christensen, global head of responsible investment at AXA Investment Management, in Australia recently to speak at the GTQ Investing in Responsibility Conference, said the Australian social benefit bonds were on a watch list of around 10 similar kinds of products around the world for potential inclusion in its impact fund-of-funds product.
AXA IM is working on a global social impact fund-of-funds, which it has been running internally, that should be ready for external launch early next year.
“We’re the first chain and we’re investing in what we think are high quality impact investing funds and those funds put the money to work,” Christensen says.
As part of that fund, AXA has set aside an amount for SBBs.
“For us we are working through what happens in Australia,” Christensen says.
“[Things like] how are they being priced and what are the real risks.”
A social benefit bond is a form of funding for social services in a three-way partnership between governments, social service providers and investors.
Investors invest in a bond, which is used to fund a social program – for example a program designed to prevent juvenile recidivism, or one to stop children entering fostercare by helping their parents.
A government pays the provider of that program a funding amount, dependent on that program achieving certain performance targets. A return is then paid to the investors from the government allocation, dependent on those targets being reached.
The AXA IM fund of funds also invests in microfinance, education and healthcare. Assessing social investments requires different metrics and analytics to most traditional types of investments.
For example, Christensen says the key metrics they look at when examining microfinance funds include:
> Are loans being made on a declining rate, rather than floating rate, of interest;
> Are the loans going to a majority of rural, rather than urban, citizens;
> Gender reach, i.e. the proportion of loans to women versus men;
> Repeat loans. Red flags are waved if loans keep going to the same people.
“We have two internal teams. It requires two skill sets,” Christensen says of the research involved.
One of those teams is the responsible investment team, which he runs, and the other is the fund-of-fund team.