Andrew Thorburn will join For Purpose Investment Partners as an executive director. Co-founded by prominent venture capitalist Mark Carnegie and Michael Traill.
/Financial Review
by James Eyers
9 March 2020
Former National Australia Bank boss Andrew Thorburn has re-emerged, joining a new originator and investor in deals to manage human services. The new group, For Purpose Investment Partners, will seek to bring superannuation funding and corporate management skills into the aged care, mental health, disability, social housing and education sectors.
Making a difference with For Purpose Investment Partners: Michael Traill, left, Andrew Thorburn and Wendy McCarthy. Peter Braig Its mission is to provide satisfactory financial returns for its partners – it's targeting an internal rate of return ranging between 8 per cent and 17 per cent – while also generating measurable social impacts. Mr Thorburn will join For Purpose Investment Partners as an executive director. It has been co-founded by prominent venture capitalist Mark Carnegie and Michael Traill, chairman of the government's social impact investing taskforce. The former NAB chief executive's return to business comes 13 months after being skewered by the final report of the Hayne royal commission. After a year’s sabbatical, he says he was lured back into business by the hope of making a difference to vulnerable people.
For Purpose Investment Partners will look to partner with existing social service providers, may tender for government contracts and could engage with church groups such as those running aged care facilities. All its deals will involve explicit, clear, measurable, social key performance indicators.
Mr Thorburn says his new role is consistent with the approach he has always taken to banking, even though he was criticised by the royal commission for not appearing willing to accept responsibility for NAB's mistakes. “During my time in banking, I always started with the customer and being part of the community," Mr Thorburn says. "It got very hard in the environment, but that was never lost for me – that was always the true north.” Super funding Industry super funds Hesta and First State are investment partners and will receive the first right of refusal on new deals, which will allow them to invest amounts of between $50 million and $100 million.
PwC and Gilbert+Tobin are advisory partners, while the Paul Ramsay Foundation and the foundation of another large institution are providing financial support for the "for purpose, not for profit". The plan is to create a few deals, and then raise an investment fund. Mr Thorburn and Mr Traill will be joined by Chris Yoo, who has a private equity background, as the third executive director. For Purpose director Mr Carnegie says it has been slow going over the past five years to create large-scale, social deals that attract superannuation funding, but “it is a tool whose time has come”. Financial returns are our core purpose ... But we are also seeking to make investments that focus on core social issues. — Debby Blakey, Hesta chief executive Some investors have worried that being influenced by anything other than financial returns may compromise their duties as trustees, but this is changing. “ESG has been sufficiently important to have overwhelmed the social purpose test,” Mr Carnegie says. “Everyone acknowledges there are some broken social markets. There are too many fights between the feds and the states. Capital can create business discipline." Mr Traill, who was the co-founder of Macquarie's private equity operations and founding CEO of Social Ventures Australia, says the slow development of the Australian social impact market – which is estimated to be only $250 million – has been frustrating, but it still has become a mainstream asset class. He wants super funds to see social impact investing like an infrastructure investment: stable, and for the long term. "What has galvanised us is the real sense this will be a multibillion [dollar] market," he says.
HESTA chief executive Debby Blakey: "We believe it is doable to tick both boxes, to have impact and meet the financial return." Wayne Taylor Debby Blakey, CEO of Hesta, says the fund is keen to "make a difference to the world our members retire into". Hesta has been a pioneer in social impact investing, having created a special $70 million fund in 2015 which has invested in a range of projects including Korongee in Tasmania, the Nightingale home model, and Horizon Housing. "We believe it is doable to tick both boxes, to have impact and meet the financial return," she says. “Financial returns are our core purpose, we know the importance of that. But we are also seeking to make investments that focus on core social issues." Social impact investing can be attractive to governments because it can reduce pressure off public sector budgets by injecting private-sector disciplines into project management. The model for For Purpose Investment Partners is Goodstart, which acquired the ABC Learning Centres after the global financial crisis and has grown to a $1 billion revenue operator showing higher occupancy levels as it focuses on quality learning outcomes. “My strong view – and Goodstart has become a poster child of this – is there is actually a strong confluence of ethical service delivery and financial performance," Mr Traill says. Another director of For Purpose will be Wendy McCarthy, the former deputy chair of the ABC, who says the boards of many not-for-profits need to be driven by commercial acumen. “If the board don’t know how to ask the right questions, they are never going to get the right answers,” she says. “Someone has to deliver a big electric jolt. But my view is many of the small-time operators will be excited about the opportunity of belonging to something bigger.” Thorburn re-connects When the Financial Review met Mr Thorburn last week, there was an initial moment of awkwardness as we weren't sure whether to shake hands given the coronavirus – but we do. He's looking fit and relaxed, with a light growth of grey, facial hair. His natural enthusiasm still abounds.
Andrew Thorburn, with Michael Traill and Wendy McCarthy: "I hope that I bring humanity. I am part of a team that will collectively make a difference." Peter Braig He's spent a year reading and travelling before working out what to do. During the sabbatical, he connected with the Global Impact Investing Network, and attended the SOCAP 2019 conference in San Francisco last October along with 30,000 other entrepreneurs, activists and managers of private capital. Mr Thorburn says the global social impact scene is a $500 billion global market but much smaller in Australia – maybe $4 billion, including green bonds. He says local super funds, many of which he knows as they were investors in NAB, are looking to make investments into the space but need to do so at sufficient size to make the economics work. “Scale does matter,” he says. Mr Thorburn knew Mr Traill from his work with Social Ventures Australia, and after departing NAB he met with Danny Madhavan, CEO at the Impact Investment Group. Upon his return from SOCAP, Mr Thorburn caught up with Danny Gilbert, of Gilbert + Tobin, who suggested he talk to Mr Traill, who had been planning the new operation with Mr Carnegie. “When I reflected about my skills and what I am passionate about – my head and my heart – I knew business and financial discipline is part of that,” Mr Thorburn says. "But looking at the socially disadvantaged and I felt I wanted to help make Australia more equitable and fairer using business disciplines. Not handouts, but properly run businesses. “You have to good financial discipline but if you can intersect that with helping vulnerable and disadvantaged people in Australia – of which there are a lot – you can make a real contribution. "The whole market can mature and grow, as people think that you don’t need to make a trade-off between getting a risk-adjusted return and doing good for society, that you measure.
Mr Thorburn says For Purpose aims to create in Australia a market for impact investing, "which in the US and Europe is more mature". “As we start to do long-term transactions, we will create more demand and hopefully get a leading position ourselves – there will be many more transactions," he says. “I hope that I bring humanity. I am part of a team that will collectively make a difference. It's a group I want to get into the carriage with. I’ll bring an edge and experience running a large-scale organisation, but there’s a unique combination of talent.” Ms Blakey says that when Hesta members, many of whom work in the health and community services sectors, are asked whether the fund should consider environment and social impact investments, they “overwhelmingly" say yes.