Transcriber: J B Reviewer: Elisabeth Buffard
Australia is a fantastic country.
But, in the 30 years since I first arrived here from Canada,
I've noted a distinct deterioration
in the infrastructure that we enjoy.
Through a lack of investment, a lack of foresight,
our roads have become clogged and jammed.
Even the new ones.
Our trains, our public transport system has become hopelessly unreliable.
Now, less obvious, but more dire,
is that same lack of investment
in our social infrastructure.
We have families sleeping in cars for lack of affordable housing.
Or condemned to a weekly cycle of checking in and out of cheap motels,
maybe five people to a room.
Our fragile elderly are parked in nursing homes
that look older than they are sometimes.
Or, they're abandoned in some ward of a creaking public hospital.
We have schools that are cobbled together out of demountables.
We have jails and courthouses that are straight out of the Dickens era.
And our young brain-injured people lie or sit in wheelchairs,
parked in the corners of nursing homes and left to rot.
The demand for investment in social infrastructure is enormous.
Not just to maintain and to renew the infrastructure that we have,
our current stock, but because all of us are going to contribute
to the tsunami of new demand,
as our population grows and ages
and as our cities swell.
We need a giant solution.
Let me see if I can put a few numbers for you
around the two sectors that I know best.
But around the need.
Inaffordable housing.
We have a great program right now around the country
where we're gonna build 50,000 new dwellings.
That's going to cost about $15 billion.
And it's not paid for yet.
But in addition to the 50,000 new families that are gonna get housed,
we have 180,000 other families today
who do not have access to appropriate housing.
If we fail to do anything about that,
it's projected by the year 2023,
that 180,000 families will turn into 430,000 households
without appropriate housing.
That's going to cost about three times what our current program costs.
In aged care, we have about 200,000 beds
that are occupied in facilities around Australia now.
We need at least another 100,000 beds.
And that's over the next 7 to 10 years.
But we must start spending now,
because it takes that long to build them.
That's gonna cost about $20 billion.
But even more urgent is,
of the 200,000 beds that people are occupying right now,
it's estimated that up to 50% are not fit for purpose.
And they need to be renovated immediately.
So that you can see that between just these two sectors alone,
forget about all the other ones we mentioned,
we need about $100 billion in capital.
And the question is, where is that gonna come from?
So, these are sort of social sectors,
and we talked a lot about philanthropy.
Let's put some numbers around philanthropy.
Foundations are specialist trust funds
where people have donated money
in order to do some kind of social good.
Now, it's not really clear,
because the numbers are a bit fuzzy.
But, in Australia, we have about $5 billion
housed in these trust funds,
in these foundations designed for social good.
We often hear a lot about individual philanthropy in Australia.
And it's pretty significant.
Last year, individuals in Australia claimed tax deductions
for just over $2 billion-worth of donations.
Now, if you assume that much again,
either deductible or for some reason wasn't claimed,
and if you add a value for the countless hours of volunteering
that goes on in this society,
we get to an annual figure of about $5 billion.
So that you can see how, between these two sectors of philanthropy,
we have about $10 billion available to do some good.
Unfortunately, beside the need, it pales into insignificance.
But there is a source of capital.
There is a source of capital which I see as a sleeping giant.
Which, if we were able to awaken and to harness,
we could channel this capital into meeting virtually
all of the social capital needs that we see around us.
And it is the Australian superannuation funds management industry.
It is enormous.
Let me give you 4 take-away points on this.
It is almost $1.5 trillion in funds management right now.
The second point is, it's growing rapidly.
Last year, it grew by $162 billion dollars: 11%.
Just to put that in perspective:
that is 1.5 times all the capital requirements we just talked about
for all of the affordable housing
and all of the aged care in Australia for the next 10 years.
Not unachievable.
The third take-away point for you
is that it is actually quite concentrated in its control.
Only less than 400 funds that make up this total
have more than $50 million each.
So a relatively few number of people
control these vast resources of $1.5 trillion.
If we're gonna make serious social change in Australia,
if we're gonna really move the dial,
we're gonna have to find a way to wake this sleeping giant up
and actually make it do some good.
We're going to have to allocate some of this capital
into the social need that we see around us.
Now, this is not a new problem.
And, we see around the world
that there have been initiatives around,
"How do we get this capital brought along our way across?"
The United Nations recently put out a set of principles
around responsible investment.
Responsible investment is a methodology
that values the social impact in the same way it values
the financial impact of an investment.
Unfortunately in Australia, that movement is just really in its infancy.
And the largest of the offerings available
for them to invest in is about $1.5 billion.
Recently, I had a chance to talk to about 2 dozen
of the leaders of these major funds.
After we had pitched the return profile and the risk profile
of this particular investment, we asked each one of them,
did it make any difference to them, if they chose to invest,
that the funds that we were raising would ultimately go
into a great social outcome?
And to a person, they said, "Nope.
It's not my problem to fix Australia's social ills."
"My responsibility is to invest my member's savings
in a responsible manner, according to their preferences."
By law, trustees are required to achieve acceptable returns
for taking on acceptable risk.
So, we have a problem now.
We've got this gulf between the need that we see around us,
which is so obvious day by day,
and an enormous pool of supply that we have,
which could potentially be appropriate.
So the question is,
can we bridge this gulf?
Can we cross over?
Are we able to bring the capital across and allocate it?
And I think the answer is yes.
But it's gonna take 3 distinct groups, working together, to achieve this.
The first is a group of intermediaries.
These are organizations and individuals who understand the social need.
They speak this sector's language.
They also understand
government priorities and government processes.
And then they also understand
that they have to generate investment product
which meets the acceptable returns for acceptable risks profiles.
Just to meet the hurdles, in order to get these funds allocated.
The second group is government.
And we're gonna ask them to do three things for us.
The first is to make clear social policy and then not change it.
Change means risk from an investment point of view.
The second thing we're gonna ask them to do
is to put a little pressure on the people who manage these superfunds,
just to remind them that they enjoy a social mandate,
a government mandate; this is where their funds come from.
Our 9% superannuation contribution levy is about to go to 12%.
And maybe the government could make that additional 1/3 growth rate
conditional on seeing some progress in this area of social investment.
The third thing we're gonna ask the government to do is
to work with the intermediaries so that we can create investment product,
using government's money, to stimulate and to effectively prime the pump.
So that enormous amounts of capital can be attracted out of the superfund
and into social infrastructure.
Now the third group of people
that we're gonna have to work and harness
to get this to happen is you.
This is actually your money.
These people are required to invest your money
according to your preferences.
And if each one of you - and everybody who sees this talk -
writes to the superfund manager that they have,
demanding a responsible investment option,
then we're gonna see this ripple effect
where one by one and piece by piece and fund by fund,
enormous capital will ultimately flow into good social outcomes.
You can demand, we can demand
that our funds are invested for our benefit,
not just in 10 years or 40 years' time,
but actually to meet the need that we see around us today.
The law of large numbers says that if enough people
repeat the same experiment again and again,
the outcome becomes highly predictable.
Well, I predict that if enough people
write to their superfund manager,
demanding a responsible investment option,
then we can and we will wake this giant.
Thank you.