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The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Moffitt and Selth in dramatic investment turn
Phil Moffitt, a former Australia head of Goldman Sachs Asset Management and renowned bond manager, and Chris Selth, an international equities manager in Sydney and New York for BT and Five Oceans, are undertaking a very different venture.
They have formed an impact investing boutique, Beckon Capital, housed in a terrace-style block in Sydney’s increasingly gentrified Redfern, and are looking to raise about $150 million to get their show on the road.
Moffitt, who also worked at BT on fixed income strategies prior to his long stint at Goldman Sachs, says: “We think that we’re in the stage where businesses look at themselves and see where they can make a difference in the community through impact. It’s impact 3.0.”
He says that ‘impact 1.0’ was just a step along from philanthropy – the notion that you were still giving something up – and then this evolved into ‘impact 2.0’ where you see you can make a good profit too.
“A lot of businesses don’t think about externalities of their actions. A classic example is Rio. People realised that it’s good business to adopt ESG principles. And slowly and surely this is happening with impact.”
What purists call ‘impact’ is at risk of being watered down through over-use as it gains in popularity among investors. Just as some fund managers have, in the past, been accused of “green washing”, whereby ESG issues are paid little more than lip service, so too firms have been accused of “impact washing” – in the US, at least, where impact is far more advanced.
Ben Thornley, a New Zealander who grew up in Australia and has lived in the US for nearly 20 years, says the big US foundations and charities tend to provide a core component of impact. He is a partner in a substantial US impact consulting firm, Tideline, and active in promoting the sector’s development.
Thornley says that, generally speaking, the three components required for an impact project are: free money from a charity or foundation, a soft loan from a government or authority and an institutional-style investor looking for a steady return of inflation plus a few per cent. All are much more prevalent in the US than Australia.
Moffitt doesn’t like to get caught up with definitions, however, with the end result of making a positive difference in the community the overriding goal. “You could say that we are ‘impact agnostic’,” he says. “For us it’s anything that helps in a community.”
So far, Beckon Capital has invested “a couple of million” of friends-and-family money and has built a technology platform to assess the social impact side of a project, which is run concurrently with traditional financial assessments.
Beckon believes this platform will give the business scalability. The due diligence done on a potential investee business, for instance, becomes “largely automated”. As the database of businesses build out, Beckon will be able to analyse successful impact companies and see the correlations between them to guide future investing.
“We’re a fintech firm which is building the tools which can be used at scale,” he says. “We will licence that. We’re talking to governments already who see it as a better way for them to assess the success or otherwise of their various schemes.”
When approaching the institutional market, which Moffitt and Selth know well through their long histories in big funds management firms, one of the issues that are faced by people with good ideas is that the funds struggle to invest in projects worth less than many millions of dollars. They also find it difficult to invest in schemes which don’t have an easy pigeon hole for them within a portfolio.
But here, Moffitt’s recent appointment, in April, as a trustee and investment committee member of Aware Super could provide a great learning experience. Aware is at the forefront of ESG investing and has also made substantial investments in venture capital.
The radical turn in his career, after 33 years in funds management, came while still at Goldman Sachs. Before finishing up his 20 years there in January last year, Moffitt completed a degree in psychology with a focus on behavioural finance at Sydney University. He has subsequently enrolled to do a PhD. After leaving Goldmans, he set up a consulting business, Green Road Consulting, to provide advice and mentoring for people to be able to make better decisions and which also manages a foundation which invests directly in businesses that are making a social impact.
– Greg Bright
