Investing in real assets that have positive social and/or environmental impacts means investors gain more than a source of return that is non-correlated to other asset classes.
During a recent webinar sponsored by Channel Capital, Matthew Tominc, CIO of Conscious Capital and Tim Short, managing director of the US-based Capital Dynamics discussed how impact strategies can be applied to real asset class portfolios.
"This is a real asset webinar, but we should speak about wat we're doing on a day to day basis, which is impact investing - seeking market rate financial term with a tangible environmental and social benefit," Tominc said. "... Our model involves acquiring properties and other real assets and providing asset management rights to charities and social enterprises. We make the investment decision, but hand over the management to charities and social enterprise."
Conscious Investment Management focuses on social infrastructure like disability housing, deep impact, such as social impact bonds, property, including affordable housing, and environmental infrastructure. Conscious Investment Management's impact fund has approximately $45 million in assets under management, with an allocation to a diversified portfolio of global impact investments, targeting a financial return of at least 7% pa over the medium term after fees, before tax, while having a positive social and environmental benefit.
Capital Dynamics Clean Energy Infrastructure is one of the largest renewable energy investment managers in the world with US$ 6.5 billion in assets under management, and is designed to capture attractive investment opportunities in renewable energy technologies, with a focus on utility-scale and distributed generation, solar, wind, and storage.
"There is an unstoppable market force driving markets toward cleaner energy," Short said. "COVID has accelerated that. Our strategy is about capturing the value in that transition and doing it in a way that provides long term contracted assets in diversified portfolios that offer cash yields and meaningful spread ... while delivering very uncorrelated returns during times like we just went through because of the long term nature of the contracts."
By investing in apartments and dwellings that are fit for purpose to support housing for people with disabilities, investors are provided the stability of long term cashflows because of the housing support in the National Disability Insurance Scheme (NDIS) while providing a social impact, Tominc noted.
"There's a hidden problem of a bunch of young people who are living with disability and living in inappropriate housing," Tominc noted.
Conscious Investment Management avoids development risk by purchasing accommodation built to standards, then partnering with a provider to manage the leasing arrangement.
Tominc also said that Conscious Investment Management's environmental infrastructure investments are focused on investing in rooftop solar panels on schools and shopping centres. Short also pointed out that Capital Dynamics Clean Energy Infrastructure also invests in distributed generation.
In responding to the illiquidity risk of real asset portfolios, Tominc noted that the premium on liquidity can be expensive for funds, and that "being in public markets doesn't guarantee liquidity and it doesn't guarantee liquidity at the right price.