Australian super fund Hesta is putting a A$500 million ($376 million) target on its next affordable housing co-investment deal as it continues to pursue sustainable development goals (SDGs), particularly on building sustainable cities.

By investing in deals at scale with other institutional investors, Hesta is trying to make an impact on the community, as the amount of money could be huge for a certain marketplace, but not necessarily for super funds, said Hesta head of impact Mary Delahunty during a panel discussion of AsianInvestor’s Mandating Change Week event on Thursday (October 28).

Mary Delahunty,
Hesta

During the discussion, Delahunty said that the provision of affordable housing was an indicator of sustainable cities – one of the few SDGs Hesta had chosen to focus on.

“Our membership cohort are unfortunately overrepresented in homelessness, in poverty, and in retirement. So, it's important for us to focus on that outcome of the SDG under sustainable cities,” said Delahunty. Healthcare and community workers make up a majority of Hesta’s members, as the fund functions as the industry super fund for the sector.

“We want to improve our members’ outcomes in housing, so that means we've got a country-specific goal,” she said. “What we've done to progress that is, try to catalyse the marketplace of affordable housing in a way that institutional investors can participate at scale.”

The next opportunity it will participate in will be somewhere around the A$500 million mark, Delahunty said, without specifying a targeted location or other details.

In June, Hesta, together with Cbus Super and other 41 institutional investors, participated in the social bonds issued by the National Housing Finance and Investment Corporation (NHFIC) to raise A$462 million for social housing, according to IPE Real Assets.

In late July, Hesta committed A$20 million to a carbon-neutral residential project in Melbourne, 40% of which were allocated to healthcare and community workers at reduced rates.

Hesta manages A$64 billion of assets from its 930,000 healthcare and community service workers.

Affordable housing has been a popular market for Australian asset owners. The A$130 billion Aware Super, for instance, invested in an urbanisation project in New York, as well as a Liverpool development that would be converted into affordable housing units, offices and retail space, earlier this year.

Under the rising environmental, societal and governance (ESG) momentum across Asia, Korean asset owners have also been eyeing similar markets. For example, Korean pension fund, the Public Officials Benefit Association (Poba), invested in affordable housing projects in the US through a joint venture with global asset owners.

On impacting investing and setting SDGs, Hesta’s Delahunty also stresses the importance of active ownership and direct engagement to help measure the impact, instead of focusing too much on achieving net-zero in the portfolio, for example, by avoiding all emitters.

“Selling stocks doesn't actually relieve the atmosphere at all, and so I think it's less about counting the money exposed and more about counting the outcome itself,” she said.

The Morrison government on Tuesday (October 26) pledged a net-zero commitment by 2050, and Delahunty said she was glad to see the federal government of Australia finally bring policy certainty to asset owners.

“Even as asset owners, once you have something to aim for, you know exactly how to direct active ownership responsibilities and direct stewardship responsibilities, and what to carry in the portfolio,” Delahunty said.

“We can actually equip three times more in renewable energy overseas than we can in our own backyard, because of the certainty of the policy settings and an understanding as to what that does to entrepreneurship, to venture capital, to private equity in our country was sort of missing,” she added.

Major economies in Asia, including China, Japan, Singapore, and Korea, have all committed to net-zero targets last year.

Mandating Change Week was held from October 25-28, 2021.