I attended another impact investing conference in Sydney last month. Nice venue. Good catering. Lots of talk about “systems change” and “catalytic capital.” And yet, when you look at where the money is actually flowing, it’s the same story it’s been for the past five years: safe bets, familiar structures, and an almost pathological aversion to risk.

Australian impact investing has grown impressively in absolute terms. The Responsible Investment Association Australasia (RIAA) consistently reports billions in assets under management. That sounds fantastic until you look at what those assets are actually doing.

The comfortable middle

The bulk of Australian impact investment sits in what I’d call the comfortable middle: green bonds, social housing backed by government guarantees, and established social enterprises with proven track records. These are perfectly fine investments. They’re generating decent returns and contributing to positive outcomes.

But they’re not doing anything that wouldn’t have happened anyway.

The test of genuine impact investing isn’t whether you can find a safe investment that also happens to do some good. It’s whether you’re willing to take risks that the mainstream market won’t, in order to fund solutions that wouldn’t otherwise exist.

By that standard, Australia’s impact investing sector is still in the shallow end.

Where’s the risk capital?

If you’re a social entrepreneur in Australia with a genuinely innovative approach to a complex social problem, your options for early-stage capital are depressingly limited. There are a handful of impact-focused venture funds, some philanthropic organisations willing to make program-related investments, and a smattering of angel investors.

Compare that to the UK, where Big Society Capital has been deploying catalytic capital since 2012, or the US, where the community development finance infrastructure has decades of operational history.

We’re not lacking money. Australia’s superannuation system alone manages trillions. We’re lacking the structures, intermediaries, and risk appetite to deploy that money where it’s needed most.

The additionality problem

This is the question that makes impact investors uncomfortable: would this investment have happened anyway, even without an impact mandate?

For a lot of what passes as impact investing in Australia, the answer is yes. A green bond from a major bank? Regular investors would buy that. A social housing development backed by a government subsidy? Commercial developers would build that.

Genuine additionality means funding things that the mainstream market considers too risky, too small, too complex, or too unfamiliar. It means backing First Nations-led enterprises. It means providing early-stage capital to organisations tackling entrenched disadvantage. It means accepting below-market returns in exchange for outsized social impact.

Some Australian investors are doing this. Not enough of them.

What would help

First, we need more patient capital vehicles. Most social problems don’t get solved on a three-year fund cycle. Impact investing needs structures that can deploy capital over 10, 15, or 20 years.

Second, we need better blended finance structures. Government and philanthropy should be providing first-loss capital that makes it possible for institutional investors to participate in deals they’d otherwise consider too risky. The government’s Social Impact Investing principles are a start, but implementation has been patchy.

Third, we need more honest measurement. If an investment fund claims to be generating impact alongside returns, let’s see the evidence. Not a glossy impact report full of vanity metrics — actual evidence of outcomes that wouldn’t have occurred without the investment.

The superannuation opportunity

Australia sits on one of the largest pools of retirement savings in the world. If even a small percentage of super fund assets were deployed into genuine impact investments — with appropriate risk management and member consent — the effect would be transformative.

Some super funds are moving in this direction, particularly in areas like affordable housing and renewable energy. But the sector as a whole remains conservative, partly due to the regulatory focus on financial returns and partly due to a lack of investment-ready opportunities at the scale super funds need.

Building the pipeline of investable opportunities is at least as important as mobilising capital. You can have all the money in the world, but if there’s nothing suitable to invest in, it just sits there.

Getting uncomfortable

Impact investing in Australia will mature when investors start getting genuinely uncomfortable. When they’re backing things that might fail. When they’re accepting returns that are adequate rather than optimal. When they’re measuring success by outcomes achieved, not just financial performance.

Until then, we’re mostly just doing responsible investing with better marketing. And the problems we’re claiming to solve will keep getting worse.