Conscious Investment Management (CIM) invests in social and disability housing, social impact bonds, and sustainability solutions.
In 2021, the Australian impact investment fund manager invested as part of a joint programme with Victorian state government and not-for-profit community housing provider HousingFirst, to source and finance approximately AUD150 million ($102 million) of social housing throughout the state of Victoria.
It was agreed that around 300 dwellings would be acquired, providing housing for around 500 people who were previously experiencing or at risk of homelessness, said CIM.
"To our knowledge, this investment was the first time that private capital has funded social housing at scale in Australia. It represents a sustainable, replicable model for having measurable impact – one that can be scaled throughout Australia," commented Matthew Tominc, CIM's chief investment officer.
According to CIM, private sector investments into social housing have been limited in Australia, despite strong demand from investors, because rents are capped at below market value; they are typically 30% of a tenant's income.
"A for-profit investment fund, with fiduciary duties, would struggle to approve an investment in social housing given the below-market rents available. This consequentially limited the scale of private capital that could flow into the sector, by ruling out larger and institutional investment funds," Tominc added.
Under the arrangement that CIM developed with the Victorian Government, the government will pay a subsidy that effectively tops up the rent paid by tenants and enables CIM investors to earn risk-adjusted, market rates of return.
"This was a highly unique and innovative structure in the Australian market, pioneering a new model of financing social housing with private capital," said Tominc.
The initiative is part of a wider approach whereby CIM partners with charities and social enterprises to acquire assets or fund programs.
"We recognise that our investment team, while values-aligned, often doesn't have lived experience in the areas in which we invest – say social housing. Our impact partner model lets us conduct a detailed financial assessment of new investments but [also] know that assets will ultimately be operated for the benefit of the end beneficiaries we seek to support," said Tominc.
CIM's impact assessment on this project considered five dimensions of impact and found positive outcomes, according to the Impact Management Project's impact measurement framework.
CIM was founded in 2019 and has deployed approximately AUD $300 million into impact investments across several funds.