In 2015, Indigenous Business Australia launched Indigenous Investment Principles (the Principles), aiming to provide a voluntary investment framework for Aboriginal and Torres Strait Islander Peoples. Preceding the launch was two years of consultations with 40 Traditional Owner groups and Indigenous organisations across Australia, along with investors, advisors, and the resource sector.
Many Indigenous organisations hold substantial financial capital, with a majority held in trusts. Funds held in trust are generally derived from the ‘conversion of interests’ of Indigenous Australians land rights and native title (e.g. land-use agreements). This process recognises the rights and interests of Indigenous custodianship, traditions, and cultural practices linked to lands and waters.
Before British colonisation, more than 500 different ‘nations’ thrived with distinctive cultures, beliefs, and languages across Australia — a measure of the diversity and rich cultural heritage of Indigenous Australians.
The Drafting Group recognised that each Indigenous nation across Australia and the Torres Strait Islands with funds held in trust is a sovereign actor in decisions about its investment. Drafting Group members included Robynne Quiggin, Bruce Martin, Gavin Brown, Nolan Hunter, Donella Raye, David Murray, Nigel Renton, and Brad Scott.
The voluntary framework aims to establish strong, enduring economic foundations, build intergenerational wealth, and contribute to maintaining the cultural, linguistic, and environmental resilience of Indigenous nations. The Guiding Objectives of the Principles include:
- Cultural heritage
- Economic independence
- Capacity building
- Build respect in markets
- Risk management.
The Principles intend to provide guidance to Indigenous communities with varying levels of financial knowledge, social and financial infrastructure. They support investment decisions that factor in unique circumstances and are made free from undue influence. The framework can be separated into three distinct stages, each with underlying criteria and considerations:
- IIP A — Community Circumstances and Purpose (red)
- IIP B — Mandate, Governance and Legal Form (yellow)
- IIP C — Investment and Risk Management Framework (blue)
A conceptual overview of the voluntary IIP investment process is represented below.
Investment challenges for Indigenous Australians
Indigenous business start-up accelerator Barayamal has highlighted that visibility is a key challenge for Indigenous-owned businesses seeking investment. It noted that in 2020 venture capital firms within Australia collectively raised $1.6 billion from investors. Of this total over the same period Barayamal reported median funding invested in Indigenous ventures was $0. This challenge has resulted in Barayamal establishing the ‘3% Aussie VC Pledge’, aimed at addressing this imbalance by seeking pledges from VC investors to commit 3% of their allocation to Indigenous-founder ventures. This commitment is in line with the 3% Indigenous employment target of government organisations.
Investment landscape, opportunities, and impact
The Principles focus on capability development and increasing Indigenous Australians’ independence and engagement with the broader economy. The Indigenous Business Australia (IBA) investment portfolio currently consists of direct investments, asset, and funds management (including the Indigenous Real Estate Investment Trust and Indigenous Prosperity Funds) and leasing and finance solutions.
As of 30 June 2020, the total IBA investment portfolio was valued at $430.7 million AUD, with Aboriginal and Torres Strait Islander investors owning, in aggregate, equity interests of $169 million AUD; with distributions of $4.8 million AUD in FY 2020. IBA’s direct investments in Indigenous organisations are across an array of sectors including, tourism and hospitality, retail, renewables, and industrial. As of June 2020, IBA had invested in 22 direct investments.
Eligible wholesale investors can find further information at IBA Funds.
Investments are intended to produce benefits alongside financial returns. For example, supporting Indigenous economic development through employment and training; seeding social enterprises to scale; and creating shared community infrastructure that may benefit education, health, and wellbeing outcomes for Indigenous communities. Many of these benefits can have long-term positive intergenerational outcomes for Indigenous Australians.
Retail investment context
From a retail shareholder perspective, the links to relevant listed equities become apparent when looking at the Principles’ guiding objectives. The resources sector is a significant contributor to the Australian economy. Mining companies are among the largest (by market capitalisation) listed equities on the ASX. From an Environmental, Social & Governance (ESG) perspective shareholders with investments in mining companies operating in Australia may well heed the guiding objectives of the Principles. For instance, respecting cultural heritage when considering mining developments. Mining companies may also consider capacity building opportunities to engage with Indigenous-owned and led businesses.
In 2020, a coalition of investors with $14 trillion in AUM put miners on notice over Indigenous Rights. This action followed Rio Tinto’s destruction of Indigenous cultural heritage at Juukan Gorge in Western Australia. Superannuation sector organisations that contributed to this action included Australian Council of Superannuation Investors (ACSI) and some of Australia’s largest superannuation funds.
Retail investors may seek to engage with Indigenous businesses via sites such as Supply Nation. In addition to IBA, First Australians Capital is funded by social impact investors and philanthropic donations, aimed at helping Indigenous business to start-up and scale.
The authors acknowledge the Indigenous nations of Australia and Torres Strait islands, their rich history, resilience and ingenuity; further acknowledging sovereignty was never ceded.
Authors
Ryan is a contributor at Altiorem and a Senior Responsible Investment Analyst at the Responsible Investment Association Australasia
Sanaya is a mentor at Altiorem and the Chief Strategy Officer at Beyond Zero Emissions
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