Total impact approach: embedding responsible investing into PRF’s Investment Policy Statement

The Australian Charities and Not-for-profits Commission’s (ACNC) latest Australian Charities Report states that charity assets now stand at $422 billion.¹ If a fraction of these assets are invested in ways which contribute to solutions to society and the environment, then Australia would make significant strides in improving outcomes for people across the nation.

This is the concept behind a ‘total impact approach’ in which charitable foundations consider all the ways in which they can create a positive impact – as opposed to targeting impact through a small percentage of total assets for grant making. Heron Foundation in the United States is credited by many as pioneering this model when it made the decision to commit 100% of its assets for mission in 2012; the practice in Australia, however, remains nascent relative to many global peers.

In August 2023, PRF approved a new Investment Policy Statement (IPS) which signalled the formalisation of its total impact approach. For the first time, this key governance document included the addition of core commitments to responsible investing across its entire Balance Sheet²:

• Establishing Impact Objectives;
• Negative screens;
• Impact risk analysis;
• Stewardship;
• Fund Manager selection; and
• Reporting.

The revised IPS lays the final building block for PRF’s impact investing strategy. 2020 marked the beginning of PRF’s impact investing activities, with an evolutionary strategy, designed to test the supply and demand sides of the market to assess where we are best placed to contribute to the impact investing’s development.

In 2022, a new impact investing strategy was approved which built on these learnings and established a strategy with three pillars:
‍

1. Impact-first Program Related Investing and market building. Impact investments which align with PRF’s impact areas and can accept concessionary financial returns due to the strength of impact created, as well as targeted grants to support market building. This is delivered through a $60m evergreen fund allocation established through the Investment Portfolio proceeds.
2. Mission Related Investing at scale. Investing into impact funds – through a 10% allocation from PRF’s Endowment Investment Portfolio – which seek to generate risk-adjusted market returns alongside demonstrable positive impact.
3. Pioneering responsible asset management. Ensuring the way in which PRF’s Endowment Investment Portfolio is deployed embeds responsible investing principles.

This paper explores PRF’s responsible investing across whole of Balance Sheet, and the process, learnings, and future considerations captured in amending PRF’s Investment Policy Statement.

Whilst PRF, like many others, is at the beginning of its journey, we are excited by the path ahead.

We believe that to accelerate the growth of total impact approaches to ensure that the impact of how capital is invested is inherently considered, we must work together and share our findings. We hope that this paper stimulates discussion, and we look forward to working with others on this collective journey.

‍

^{1 ACNC (2023). Australian Charities Report; 9th edition}

^{2 References to PRF’s Balance Sheet refer to freely available Balance Sheet which excludes PRF’s Ramsay Health Care shareholding}