Introduction
Aotearoa's impact investing sector is growing, and so is the need for impact measurement. Purpose Capital released its second annual impact report this past month, outlining the impact of recent transactions. We sat down with the team at Purpose Capital to discuss this report and its meaning while debating the implementation of Operating Principles for Impact Measurement. So here are some of the highlights from our conversation with Purpose Capital.
Congratulations on recently publishing your 2nd impact report! What are you most excited to share about this report and its process? What are some key impact highlights?
This is the first year Cool Group has been part of our portfolio. We were particularly proud to report on the Greenhouse Gas (GHG) emissions avoided since our investment (3,834 tonnes CO2e) and the potential GHG emissions that will be avoided due to our investment – a massive 100,000 tonnes CO2e.
What may be different from your first report?
This year, we interviewed leaders of two of our portfolio companies to understand better, among other things, the less tangible effects of our investment and how we could better support these remarkable companies in reaching their impact goals.
We learned that we've contributed broader thinking around the impact of Lodestone Energy. For Cool Group, we've enhanced credibility, provided strategic advice, and directly supported their ability to scale.
Lodestone's goals include achieving a 4-5% share of the New Zealand electricity market, all through renewable generation – supporting both the country's climate commitments and energy independence. Cool Group's ambitious environmental goal is to reach a point where the average dairy farm uses less refrigerant at a significantly lower Global Warming Potential than the average household. Their biggest challenge is quickly increasing production capacity to meet the rising demand for their next-generation refrigeration technology.
What may you look to improve or integrate into next year's report?
We are looking to integrate other key ESG metrics as we are able, particularly those in the ESG Data Convergence Initiative (EDCI). We also have an eye towards aggregating metrics that are shared across portfolio companies.
[Purpose Capital's Impact Reports are available on their website here.]
Please share Purpose Capital's process in working with its portfolio companies to gather impact data for the impact report. Explain why this process is rewarding for Purpose Capital and the Portfolio Companies.
As much as possible, it's essential to set these expectations up front so this process begins before investment. We work with each portfolio entity to agree on metrics we collect and report. They are then collected annually or quarterly, depending on the nature of the investment. We also ask the companies to share impact stories with us occasionally to give a more holistic picture of the impact. It's rewarding for both Purpose Capital and the portfolio companies to take a moment to acknowledge and celebrate these achievements.
In some cases, working with the company to understand the data behind the metrics is unexpectedly rewarding. For example, Cool Group – being data-driven by design – could show us Total Equivalent Warming Impact (TEWI) figures from each unit sold from the investment until the financial year-end. There is something unexpectedly beautiful about a spreadsheet of bar graphs showing the tonnes of CO2e abated with each unit!
You also came out with another report! Recently, you signed up for the Operating Principles for Impact Management and released your disclosure report. Please share your reasons for joining the Operating Principles group with the IIN community.
It's always been important to us to incorporate best practices. Becoming a signatory to the Impact Principles is a natural step in continuing to increase our rigour. [Read more and access the report here.]
From your perspective, how have the operating principles helped Purpose Capital processes implement IMM?
Joining the Impact Principles has helped us articulate things we have already been doing and consider where and how to improve.
From your and the markets perspective, what principles are the most challenging to implement?
Great question. All of the principles are relatively easy in the context of what we were already doing; however, there are several areas where we'll be doing more work in the future. For example, Principle 7 refers to exits being conducted considering sustaining the positive impact. Given that Purpose Capital has yet to sell any of our shareholdings, this is an area we'll be diving into more deeply in the future.
In terms of the market, more generally, the Impact Principles secretariat shared on a recent webinar that Principle 8, "Review, document, and improve decisions and processes based on the achievement of impact and lessons learned", is frequently highlighted as an area with the most opportunity for improvement.
Purpose Capital also recently won an award at the Mindful Money event! Please share your thoughts on receiving this award and what it means to Purpose Capital.
Mindful Money does excellent work, and their annual conference and awards are a fantastic energy boost for New Zealand's sustainable and ethical finance sector. Winning the Best Impact Investment Fund award for the third year tremendously validates our work. While we'd love to keep winning each year, we'd also like to see more impact funds entering the New Zealand market as competition!
There is no doubt that Purpose Capital has been staying busy, but is there any additional exciting news that you would like to share with the IIN community moving into the second half of the year? Anything that we should keep our eyes out for?
We hope to make another exciting announcement in the next few months, so keep an eye open!
Conclusion
The IIN would like to thank Purpose Capital for their time and for providing their thoughts on this informative work. We look forward to seeing how this piece may inform the ways which the impact of capital projects is measured in Aotearoa. If you want to learn more about and stay informed about this work, follow IIN and Purpose Capital!
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