JEDI Investor Spotlight: Te Puna Hapori Infrastructure Fund

Brightlight Impact’s Head of Investment Management Simba Marekera tells GenderSmart about the development and implementation of a radically inclusive community infrastructure strategy in New Zealand.

How was the strategy developed?

The genesis of the product was through a Community Trust. For background context, a few banks were owned by the New Zealand government, and when they were privatised, the proceeds were split into different regional Community Trusts with the mandate to invest in the community’s most vulnerable members. 

One of those trusts came to us; they wanted to do more to use their grant funding and their portfolio to invest in the community. We knew that some of the most vulnerable communities we’d be targeting were Maori or indigenous communities. So rather than starting with investor needs, we started by talking to community elders, non-profit organisations, local government leaders, and others. 

We discovered that a lot of smaller community projects and infrastructure lack funding because they're too small for capital markets, and they don't tick all the boxes for banks. So if you are trying to build a local healthcare clinic for Maori women in a low income community, you struggle - one local organiser we spoke to had been trying to do this for 20 years. There were other pain points around flexibility in terms of the payment schedule, and really focusing on the needs and the aspirations of the community rather than what is seen as ‘sexy’, or strategic priorities for the government. 

“A lot of smaller community projects and infrastructure lack funding because they’re too small for capital markets, and they don’t tick all the boxes for banks. ”

In terms of the product structure, we intentionally partner with the community by not investing any equity into these projects. The community maintains 100% ownership, and we provide flexible debt on top of that. That allows us to ensure that we are always co-investing with the community, and the infrastructure we're building always belongs to the community.

How did this community-first approach help with the development of impact measurement and outcomes?

I'll speak a little bit about the Treaty of Waitangi because this is a foundation of how we try to deliver outcomes for beneficiaries. When the Europeans came to New Zealand in the 1800s, they signed the Treaty of Waitangi to collaborate with the Maori, build a nation together and share resources. From a Maori perspective, the spirit of that treaty hasn’t been upheld. Even though it's not said explicitly, they feel that throughout the years, there's been racial discrimination. And so we felt that, in order to build this product, we needed to use the Treaty principles as the basis for how we approach impact. 

Alongside that, we also knew that New Zealand has this geographical index of multiple deprivation in areas of employment, income, healthcare, and education. Again, it's not surprising that because of the historical racial discrimination (even if it’s not called that), most of the areas of deprivation are where most of the Maori people live. So that gave us a sectoral focus.

What were the challenges that arose when you were looking at that community-led aspect?

One of the biggest challenges was that none of us are Maori, which made it harder to gain the trust of the community. We went through the Community Trust to approach one of the Maori elders and explain the vision, and acknowledge that we have a lot to learn - for example, the language, so that you know the greeting when you go into meetings. We really wanted to empower the community and I think he bought into that. We had a letter from him that said, “I trust these guys, talk to them.” And he gave us the name of the strategy - Te Puna Hapori - which in Maori means ‘community spring’. That's the brand the community resonates with rather than Brightlight and I think we're okay with that. 

“If you talk to the Maori people, they don’t really like the fact that they’re viewed as the victims in need. They need people to leverage the strength of their culture and values ”

If you talk to the Maori people, they don't really like the fact that they're viewed as the victims in need. They need people to leverage the strength of their culture and values rather than designing solutions for them as victims. For example, when presenting a project as potential investment opportunity more widely, we consult with the leaders of the beneficiary Maori organisation to ensure this comes across as an empowerment project rather than a saviour and victim project, and that goes into the principle around validation and protection of local culture and values. We discovered that women’s leadership was prominent in a lot of our pipeline, leading to greater opportunity to support women’s empowerment through the projects. The intersection between JEDI and gender came together really well here. 

One of the things you mentioned was around the framing and how race is implied but not explicit. Part of what you're talking about is justice, restoration, and reparation. How did that show up in investment conversations?

As I say, in Australia and New Zealand, race is not viewed as an issue from a broader community perspective. But if you talk to the First Nations communities here in Australia, and Maori communities, they definitely feel there's been a high level of racial discrimination over the years. And so the Maori community are seeing this as the opportunity to close the gap between them, and non Maori New Zealanders, and to resolve some of the injustices of the past. One Maori leader said this is really about empowering our people, providing them with jobs, and a decent place to live. In our context where racism is not an explicit social justice issue it is not addressed as a standalone. Rather,  symptoms of racism - a lack of employment, lack of decent place to live -are the key focus.

What kind of response are you getting from the investor community? 

“I think people are still skeptical that you can truly have a product in the market, particularly targeting the Maori communities, with the right risk return profile. ”

It’s been very positive on one hand because of the journey we've been on in terms of curating this opportunity, and investors see how it is fulfilling real needs. On the other hand, I think people are still skeptical that you can truly have a product in the market, particularly targeting the Maori communities, with the right risk return profile. Part of that is about preconceived notions around investing in Maori communities. Part of that is that investors are used to buying bonds issued by a double A rated company. To mitigate some of those risk/return fears, the Community Trust we are partnering with also do a bit of blended finance structuring to optimise the risk profile. Finally, while we are targeting New Zealand-wide,  investors are coming with specific sector or regional preferences. To address this, the strategy involves allowing investors to invest in a fund with national exposure or though a customisable separately managed account, or directly in particular deals in their preferred geography or sector. That was all informed by investor feedback.

In terms of thinking about how such an approach could be scaled in other contexts, what would you say needs to be put in place - and how did this get funded?

One thing I didn't mention is that the Community Trust not only committed to anchoring this strategy, but also committed to funding some of the design work. So for the first 12 months, when we were going around the community, we were being funded. I’m not sure we’d have had the capacity to do that otherwise. Finding a community partner who is willing and able to provide that is helpful, because then you don't have the pressure of quickly trying to create a scalable product. 

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