WEL Energy Trust is a New Zealand community trust working across three districts in the North Island. RIAA spoke with Raewyn Jones, the CEO of WEL Energy Trust about the Trust’s work.
The community foundation model is a common one across New Zealand. Can you tell us briefly about the model and what it means for the delivery of your work?
There are a range of philanthropic Trusts and Foundations in New Zealand, including Community Trusts (formed to distribute the profits accumulated by Trust Bank), Community Foundations (donor funded), and Family trusts and foundations.
WEL Energy Trust is an Energy Trust (as the name suggests!) and is one of 24 Energy Trusts formed in 1993 for the purpose of holding shares in the local electricity lines distribution company. Many Energy Trusts return an electricity lines discount each year to consumers, and a minority are also able to provide grants to the community more broadly.
There are limitations under all Trust Deeds associated with the beneficiaries of Trust funds, but increasingly Trusts and Foundations across New Zealand are becoming interested in how they can use their investment funds as well as grant funding to achieve their purpose. This is the position WEL Energy Trust found itself in in 2017 when we first starting to look at impact investing.
Can you walk us through your theory of change and how your role as an investor sits within that?
Social and impact investment were new areas to the Trust in 2017/18. We were looking to explore investment opportunities where we could work with others to impact on regional priority areas – returning a balance of social and financial dividends to the Trust.
As a first step, the Trust developed a general Theory of Change which was that IF we make coordinated use of different forms of financial capital and non-financial resources to support innovation and the wider innovation ecosystem, THEN we would begin to see the systemic change required for impact at scale.
This was about using both grants and our investments to achieve the Trust Purpose. We developed an action plan that had 3 focus areas:
1. To research, design and implement an impact/social or blended capital investment project – we wanted to give it a go!
2. To develop a community of practice around impact investing – we wanted to learn and share on our journey.
3. To understand the wider social finance ecosystem in NZ and identify areas where we could add value – we wanted to contribute to building the impact ecosystem to make it easier for ourselves and others to engage.
You are the Founder and co-Chair of the Waikato Wellbeing Project. Can you outline what this project is about, how it connects with the Sustainable Development Goals and promotes place-based investing?
The Waikato Wellbeing Project is a regional initiative to achieve a more environmentally sustainable, prosperous and inclusive Waikato region by 2030. The key outcome of the project to date has been to develop a defined set of SMART Wellbeing Targets, for the Waikato, based on the United Nations Sustainable Development Goals. These were launched in February this year at a summit with 350 business and community leaders, and the Prime Minister in attendance.
As a region we have multiple agencies working towards multiple targets with no current overview of the collective impact. The wellbeing targets offer a powerful tool to enable our region to work together more effectively, attract capital to purpose and leverage investment and government funds for local priorities.
Businesses are also increasingly seeing that profits are in no way inconsistent with purpose, in fact they are inextricably linked. Larry Fink (CEO of BlackRock) said in his letter to CEOs, “Purpose unifies management, employees, and communities.” The Waikato Wellbeing project aims to attract capital to purpose by identifying shared targets for our region’s wellbeing.
We have recently appointed an executive director to catalyse the targets into action. WEL Energy Trust has committed $3 million over 5 years to support this collective work as we see a systems approach as being essential to promote effective place-based investing – whether through local or central government, grants, business or other investments.
What has WEL Energy Trust’s journey been thus far around how you invest your corpus and being a responsible investor?
Essentially grants, social and impact investment, the Trust’s shareholding in WEL Networks Ltd, and our equity investments are now all viewed with a risk/return/impact lens.
We have made some progress and have been involved in what could be called ‘field building activities’, we’ve built management capacity, and selected some areas to invest in. As a result, we’re starting to see impact investment networks being developed, we’ve got policy documents in place, have made changes to our investment portfolio and we’re seeing reports being provided on risk/return and impact in some areas. There is still a long way to go.
WEL Energy Trust champions blended finance as the model for your impact investing activity. Can you tell us more about that?
We developed a community investment strategy based on a blended finance model, where all our investments are under a Sustainable Development Goal banner. It is easy to understand that grants should have a measurable positive social or environmental impact, but we have started to look at how we could use grants to support other investments that would provide a blend of financial and impact return.
The Trust has also looked at its 100% shareholding of WEL Networks Ltd and requested multi-bottom line reporting. The Company has now started to measure and report on carbon emissions for example, and therefore has started to manage them also. We seed funded the development of a regional impact investment fund, Purpose Capital, with some initial grant funding, and later committed $5 million to investment in the Fund. We’re also increasingly looking at the Trust’s funds under management and moving those towards a fully responsible investment approach.
What developments are you seeing in the New Zealand market relating to responsible and impact investing which are most encouraging? Where is work needed the most?
The development of impact funds in New Zealand is encouraging, though they are at an early stage. It will be great when we have mature funds demonstrating success. Responsible investment funds are demonstrating success, especially in these uncertain times, and that is encouraging.
The recovery and rebuild from COVID-19 presents opportunities to put sustainable finance goals into action. The Sustainable Finance Forum report 2020 sets out a roadmap to social, economic and environmental gain – we can’t wait for change, leadership from all levels including business, philanthropy, government and investors is needed if we are to follow the roadmap to a better future.
