The Sector

Featured Impact Fund: Try, Test and Learn Fund (Australia)

Using insights from the Australian Priority Investment Approach to Welfare, the $96.1 million Try, Test and Learn Fund is trialing new or innovative approaches to assist some of the most vulnerable in society onto a path towards stable, sustainable independence.

The fund focuses on priority groups identified, through analysis of Priority Investment Approach data and other policy considerations, as being at high risk of long-term welfare dependency.

The objective of the Try, Test and Learn Fund is to generate new insights and empirical evidence into what works to reduce long-term welfare dependence. Project selection is based, in part, on the value of the evidence that they will generate. Projects will be evaluated to produce high-quality policy evidence about the effectiveness of interventions, for whom, and under what circumstances. In this way, the fund will allow the Government to identify approaches that work, and use this evidence to transform our investment in existing programs or make the case for new investments.

The Try, Test and Learn Fund takes an open and collaborative approach to policy development. This approach is focused on seeking new ideas from and collaborating with a diverse range of stakeholders, including the community sector, business, academia and the general public, in order to develop new ways of tackling complex social challenges. Co-development activities are embedded into projects supported by the fund to refine and optimize project design. These co-development activities are tailored to the needs of each project and may involve collaboration with end users, the Commonwealth and other stakeholders.

The Try, Test and Learn Fund will help achieve the objectives of welfare reform—that is, to develop a modern welfare system that increases the capacity of individuals, reduces the risk of welfare dependency and maintains a strong welfare safety net.

Tranche one and tranche two

The first tranche of the Try, Test and Learn Fund was open for ideas from 9 December 2016 to 24 February 2017. Read more about tranche one.

The second tranche of the Try, Test and Learn Fund was open for applications from 22 November 2017 to 28 September 2018. Read more about tranche two.

Source: Australian Government, Department of Social Services: https://www.dss.gov.au/review-of-australias-welfare-system/australian-priority-investment-approach-to-welfare/try-test-and-learn-fund

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The Sector

Launching a Social Enterprise: Structural and Pre-Operational Considerations – Andrew Valentine.

What planning issues should be considered

when establishing a social enterprise?

When a social entrepreneur considers beginning a new social enterprise or when the directors of a charity or NPO consider introducing a new social enterprise program, a range of issues must be addressed. Having a well-considered business plan is vital to success.

Andrew Valentine, LL.B. • Partner, Miller Thomson LLP in brilliant fashion, outlines the various factors to be taken under serious consideration, in detail. This blog-post will provide his description of the operational priorities which should be questioned and clearly addressed in the business plan; for directors to consider when planning to introduce a new social enterprise.

Operational priorities

Determining the operating goals and priorities of the social enterprise is crucial. What is the enterprise’s fundamental purpose? Is it to further a social purpose directly, for example, by providing employment to marginalized individuals? Or is it primarily to generate a financial

return that can be used to support the operations of a charity or NPO.

These questions affect both the initial structure of the enterprise and ongoing operational decisions, so thinking them through carefully is crucial. As the organization operates, it will likely encounter tension between the competing priorities of revenue and social mission.

For example, if revenue from the enterprise disappoints, how flexible should the enterprise be with its business model or its willingness to seek new revenue opportunities? Should such changes be made even if they might diminish the social mission? Or should the social mission

remain paramount, even if this means lower revenue and greater need to supplement revenue through grants or public donations?

These questions can be answered more coherently and consistently if the founders of the social enterprise have established a clear purpose and set priorities for the social enterprise at the outset.

Source: 20 Questions Directors of Not-for-Profi tOrganizations Should Ask About Social Enterprise, Andrew Valentine, LL.B. • Partner, Miller Thomson LLP, Charted Professional Accountants Canada: https://www.cpacanada.ca/en/business-and-accounting-resources/strategy-risk-and-governance/not-for-profit-governance/publications/social-enterprise-questions-for-nfp-directors

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The Sector

Featured Impact Investor: ACTIAM

ACTIAM is a trendsetter when it comes to impact investing. They launched they’re first institutional funds in microfinancing as early as 2007 and 2008: ACTIAM Institutional Microfinance Fund I and II respectively. The firm’s strength is making investment opportunities scalable in high-impact themes. With a track record of over 12 years in impact investing, our team demonstrates a sound performance.

Making Impact Investing Scalable

ACTIAM offers capital and knowledge and develop small initiatives into scalable investments. They monitor the progress, measure the impact, prepare reports and safeguard the robustness of the process. The firm is also active in the professional development of the sector. In 2018, ACTIAM was the co-author of the ‘PRI Impact Investing Marketing Map’ of the United Nations Principles for Responsible Investments.

Track record ACTIAM Financial Inclusion Fund (previously ACTIAM Institutional Microfinance Fund III -AIMF III)

The fund was launched in December 2014 and provides debt capital to MFIs (microfinance institutions). The fund capital committed by the participants amounts to €106.5 million and has a net asset value of €116.3 million (Q4-2018). The fund invests in 47 entities divided over 25 countries (Q4-2018) and achieves an IRR since inception of 3.8%, year-end 2018.The average maturity of the loans is 2.5 years.

The ACTIAM Financial Inclusion Fund applies the sector-specific responsible principles of the Principles for Investors in Inclusive Finance (PIIF) and achieved the highest rating A+ (2018).

The ACTIAM Financial Inclusion contributes among others to meeting the Sustainable Development Goal 1 (no poverty), Sustainable Development Goal 8 (decent work and economic growth), Sustainable Development Goal 9 (Industry, innovation and infrastructure) and Sustainable Development Goal 10 (Reduced inequalities).

The fund has provided 230,000 employees (2018) with (improved) access to funding; almost 80% of these employees are women and more than half of them live in rural areas.

Continually Innovating

ACTIAM launched its first institutional funds in microfinancing as early as 2007 and 2008: ACTIAM Institutional Microfinance Fund I and II respectively. Both funds have continuously outperformed the SMX Microfinance Index. As a thought leader in impact investing, they keep looking for new solutions for example, in the area of food and agriculture. Due to a growing world population and increasing prosperity, the demand for energy and food rises accordingly.

Please read their case study on impact investing about a loan to Khan Bank in in Mongolia.

Source: Actiam: https://www.actiam.com/en/investment-solutions/impact-investing/

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The Sector

Featured Impact Investor: Vital Capital Fund

Vital Capital Fund is a private equity fund with approximately $350 million in assets. The fund invests in developing areas, principally sub-Saharan Africa, in businesses and projects designed to enhance quality of life, and also offer substantial investment returns. The primary investment focus of the Vital Capital Fund is on the development of infrastructure, housing projects, agro-industrial projects, renewable energy, health care, and education. Among the fund’s investments are the Luanda Medical Center in Angola and WaterHealth International (Source: Investopedia (https://www.investopedia.com/articles/active-trading/090115/top-5-impact-investing-firms.asp)).

Impact Mission

At the core of every investment and decision they make at Vital is impact mission. The firm’s goal is to improve economic, personal and social well-being for low and middle-income communities in sub-Saharan Africa.

An Outcome Based Approach

Refining their focus, the firm has broken down their mission into four distinct but interrelated outcomes. They believe that investing in businesses that tackle these four broad themes will feed directly into tangible improvements in the economic, personal and social well-being of target populations.

Vital Essentials

Increased access to food, clean water, healthcare, housing and other essentials which are currently inaccessible (unaffordable or unavailable) to target communities.

Vital Employment

Increased quality skilled and unskilled job opportunities to improve economic well-being and social mobility.

Vital Capabilities

Increased local capacity and know-how which will result in sustainable, long-term improvement in well-being.

An Outcome Based ApproachRefining our focus, we have broken down our mission into four distinct but interrelated outcomes. We believe that investing in businesses that tackle these four broad themes will feed directly into tangible improvements in the economic, personal and social well-being of our target populations.

Vital EssentialsIncreased access to food, clean water, healthcare, housing and other essentials which are currently inaccessible (unaffordable or unavailable) to our target communities

Vital EmploymentIncreased quality skilled and unskilled job opportunities to improve economic well-being and social mobility

Vital CapabilitiesIncreased local capacity and know-how which will result in sustainable, long-term improvement in well-being

Vital InfrastructureImproved infrastructure to provide for safe, connected and sustainable environments which facilitate economic growth and improved well-being

Managing Impact

Translating their approach into practice, they have established an investment process that integrates impact considerations at every stage. Industry-standard benchmarks as well as proprietary tools help Vital to evaluate each investment in terms of its potential and actual, short- and long-term impact.

Download Vital’s Impact Reports here: https://www.vital-capital.com/impact/

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The Sector

Featured Impact Investor: S3IDF

The Firm

S3IDF uses its Social Merchant Bank Approach (SMBA) to provide entrepreneurs with three bundled services: leveraged co-financing, technology access and knowledge, and business development support. By tailoring the approach to local conditions and markets, S3IDF enables the poor access to employment, asset-creation and ownership opportunities, and basic services. Our project portfolio includes solar, biomass and biogas, water, and other technologies for small-scale industries.

S3IDF’s Perspective on Impact Investing

“Doing well while doing good.” This unofficial slogan of the impact investing community, which indicates that it is possible and expected to achieve both financial returns and social impact through investments into companies, rarely encourages discussion of what is truly meant by “doing well” and “doing good.”

At S3IDF they believe that too often impact investors fail to explore what financial returns are realistic given the complexity of certain types of social problems. Addressing complex issues in the world’s most difficult-to-serve communities simply costs more. Why?

Among myriad reasons are inefficient supply chains, weak infrastructure, ambiguous or counterproductive regulations and policies, and lower ability-to-pay and education levels of target consumers. Entrepreneurs that take on the challenge of delivering products and services under these conditions need more, sometimes significantly more, money, time, and support to achieve impact.

The issue is not that these entrepreneurs need more resources but that there are too few impact investors willing to trade market rate financial returns for additional high-value social impact. Until this changes, too many of the world’s most intractable problems will remain underfunded and unresolved.

S3IDF, as a conscientious investor, supports pioneering early-stage entrepreneurs that aim to improve lives and livelihoods in underserved communities. We recognize that in order to do so, entrepreneurs need to re-make markets to be more inclusive – a process that often involves trailblazing new business models and building out enabling infrastructure. The benefit is that impact is achieved on both the community level as well as on the market level, laying a strong foundation from which further development can be pursued and additional impact can be realized.

Accordingly, they assess entrepreneurs’ business models by considering their potential financial return relative to their expected direct impact on customers’ lives and livelihoods and their ability to confer other benefits within the local economy. We call on others to do the same. Together we can push impact investing to its next logical evolution to truly ensure that we are “Doing well while doing good.”

Source: https://s3idf.org/what-drives-us/?gclid=CjwKCAjw2uf2BRBpEiwA31VZj0tusXTwBoWw-eqekBzaal218_ZqXpdUvhp1B_pHd6GVSfFHsaRAixoCwLsQAvD_BwE

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