Purpose Driven Capital’s Investments and Impact
The Sustainable Enterprise Fund, as an ESVCLP, only invests in early-stage ventures as defined by the Australian venture capital regulations. The regulations allow for an extensive scope of qualifying investments; however, Purpose Driven Capital has chosen to focus its attention on investments that align with its Purpose.
Fundamentally, our purpose is to fulfil two key and interconnected roles, as follows:
- A fund or funds that produce high value returns for its investors
- A fund or funds that invests in and supports projects which produce sustainable and quality services, products and outcomes that broadly benefit all stakeholders, including the environment, society, impacted communities, and future generations.
To guide our investment decisions and impact assessments we apply an ethical framework, which is outlined below.
Long-term Approach
We take a long-term approach to the ethical screening and impact of our investment strategy. This means that we consider how each investment may have exposure to ethical or impact risks and opportunities, as well as how they work together to produce the best possible outcomes.
We will not invest in the expansion of existing methods that are deemed unsustainable or unethical over the long term. Investments in improving the impact of existing methods may be considered, as innovation is often iterative and unpredictable. Net social and sustainability gains and benefits are vital on an ongoing basis so investment in improvement initiatives should not be ignored out of hand.
Our Investment Committee is charged with the stewardship of our screening, risk management and impact strategies for each investment. Our screening strategies are elaborated below.
Negative and Positive Screens
A set of negative and positive screens is applied to our funds, with adjustments made as appropriate.
“Negative screens” are the activities that are “screened out”. Companies, entities, or issuers that engage in these (harmful) activities beyond the permissible limit are excluded from consideration for investment.
In addition, we also incorporate a “positive screen”. Companies that engage in these favourable activities are given a preference for investment by the fund.
When screening, we like to assess companies, their subsidiaries, and other entities where the company has a controlling stake.
Guidelines for our Investments
Purpose Driven Capital seeks to make impact investments.
All investments are negatively screened to ensure they do not negatively impact on our Purpose; however, we acknowledge that it is often not a black and white assessment process because enterprises can be involved in a blacklisted industry but for a Purpose positive gain, e.g., a biotechnology business might use tobacco for positive medicinal purposes.
Additionally, impact investments are assessed to ensure they meet our impact baseline, i.e., meet our criteria for either a climate or sustainable enterprise focused investment.
When looking at direct exposures we are assessing whether the company has business activities that are excluded within their company, its subsidiaries, or entities where it has a controlling stake. These direct exposures are usually a source of revenue for the company, or that come about as part of that company undertaking their revenue-earning activities. For example, a company whose business activity is coal mining has a direct exposure to fossil fuels. In most cases, we take a zero-tolerance approach to direct exposures to excluded activities.
We also exclude companies we consider to be indirectly exposed to excluded activities, where those indirect exposures are considered to be specific to and significant for the excluded activity. We make the distinction between exposures that are an ordinary part of business (like providing office furniture or having minor shareholdings in a treasury portfolio) and ones where the exposure is specific to and significant for the excluded activity, like the provision of a train to a coal mine or engineering services tailored to fossil fuels. As the exposure needs to be significant, there is usually a de minimis exposure allowed to indirect exposures to excluded activities.
The considerations for the impact baseline are outlined in the table below:
| Dimension | Description | Expectations for impact investments |
| Authenticity | Is the investment structured in a way that indicates the impact is intentional? Is the investee able to clearly articulate the impact & how it should be achieved and measured? | The investee should be able to present a strong case demonstrating that their actions contribute to positive and sustainable change in the world. The capital we contribute should directly connect to the outcome. |
| What | What is the outcome or impact that this investment tries to create? Does this outcome serve the needs of the stakeholders? | The outcome/impact should be closely aligned to, or at least not contrary to our Purpose (climate change and/or a healthy relationship with nature). |
| Who | Which stakeholders experience the outcomes of this investment? Are they underserved? | Benefits for investors and stakeholders are clearly identifiable and attributable. |
| How much | What is the scale of the outcome (how many people benefit)? What is the degree or depth of change stakeholders experience? Are the benefits long term or short term? | Impact should be broadly experienced, or if there is a confined set of stakeholders, then the impact sought should be ‘deep’ and meaningfully progressive. |
| Contribution | Is our contribution meaningful? Would this change occur without this investment? Is the motivation to invest in the product based on the impact, or is it more about the financial outcomes? | Seek investments where the funds create tangible primary benefits as well as in secondary markets or the extended ecology of all stakeholders. |
| Risk | What’s the risk of the project not achieving its intended benefits or impact and are there other negative outcomes that might occur? | Minimise investments with high risk of failure (unless the failure contributes to better knowledge about effective solutions) |
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Industry / Activity |
Exposure Limit Guidelines (% of total investment portfolio) |
Explanatory notes |
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Fossil Fuels – direct |
0% |
Companies which have fossil fuel reserves, fossil fuel infrastructure, or are involved in the mining, extraction, burning of fossil fuels. |
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| Fossil Fuels – indirect | 20% for products and services. | Companies which provide products and services specific to and significant for the fossil fuel industry. | |
| Gambling | 0% for casinos, manufacture or development of gaming products, and poker machine operations whether land based or on-line
20% for specific and significant services to the industry, including distribution of gambling products |
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| Tobacco | 0% for production or manufacture or distribution of products intended for individual consumption – smoking, chewing etc
20% for specific and significant services to the industry |
Alternative uses for tobacco that meet out guidelines | |
| Destruction of Valuable Environments | 0% | Companies which have a direct negative impact on recognised UNESCO World Heritage and High Conservation areas. | |
| Animal Cruelty | 0% | Companies involved in live animal export, animal testing for cosmetic purposes, (intensive) factory farming, or controversial animal products (ivory, foie gras etc.). | |
| Chemicals of Concern | 0% | Companies which produce or use chemicals of concern recognised by the UN Environmental Program. | |
| Mandatory Detention of Asylum Seekers and For-Profit Prisons | 0% | Companies which operate detention centres or provide specific and significant services to detention centres. | |
| Alcohol | 0% for production or manufacture or distribution of products intended for individual consumption – alcoholic beverages
20% for specific and significant services to the industry |
Companies which produce or sell alcohol. | |
| Illicit Drugs or Substances | 0% | ||
| Junk Foods | 33% | Companies which produce or sell junk foods. | |
| Pornography | 0% for production of pornography | Companies which produce or sell pornography. | |
| Labour Rights | n/a | Evidence of direct and systemic labour rights violations including child labour, forced labour, sweatshops, bribery, and corruption. | |
| Payday Lending | 0% | Companies that offer payday lending (or equivalent) services | |
| Controversy | n/a | Companies which engage in activities against the ethics of the fund that are not captured neatly by the negative screens listed above. | |
| Human Rights | 0% | Companies which engage in or are associated with human rights violations including:
· Slavery · Human trafficking |
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