Charity impact investment fund reaches first close
29 September 2020 at 8:39 am
Save the Children Australia’s CEO says this is just the beginning
Australia’s first impact investment fund run by a charity is ready to start investing in a number of technology for development opportunities after reaching its first close of $6 million.
The Save the Children Impact Investment Fund, which opened to investors in January, is aimed at supporting enterprises that emphasise social innovation and address pressing social and humanitarian issues.
The fund is focused on edtech, e-health and fintech innovations improving the lives of disadvantaged children and families.
Save the Children Australia’s CEO, Paul Ronalds, told Pro Bono News the fund would ultimately allow the organisation to achieve its mission faster.
“We’ve got this extraordinarily ambitious mission where we want to make sure that no child under five dies from a preventable cause and that every child globally gets a quality basic education, and we’re not going to achieve that ambition, without getting access to significantly more funds than what we’re currently doing,” he said.
“Impact investing provides the opportunity for us to scale in a way that we couldn’t otherwise and therefore support many more vulnerable children than we would otherwise do.”
He said the first close was an important and exciting milestone, especially considering the additional challenges of an uncertain economic environment.
But he said there were a number of features that made the fund attractive to investors, including its focus on delivering solutions, and its focus on vulnerable children.
“I think the third issue which is perhaps the most important but least understood is the opportunity to leverage the Save the Children platform to both source investments but also to help initiatives succeed. That’s something that other venture capitalists or other impact funds simply can’t match,” he said.
‘Just the beginning’
Ronalds said it was “just the beginning”.
The goal is to raise another $4 million – to get to a total $10 million – to invest in around 10 initiatives that can provide an appropriate financial return over the life of the fund, and critically, achieve a huge social impact.
There are also plans to raise a bigger 20 to 30-million-dollar fund in two to three years’ time, after this fund has been deployed.
“Save the Children is a US$2 billion organisation and at the moment we use almost no money or deploy no resources from an impact investing perspective, so globally we think there is an opportunity for Save the Children to use say US$100 million of impact funds to scale some of our innovations across the movement,” Ronalds said.
“We really see this as a pilot here in Australia, a first for Save the Children globally but one which we are looking to replicate in the US, the UK, and other markets. We’re also looking to build a second, much larger fund off the back of hopefully our success over the next couple of years here in Australia.”
New ways to fund innovation needed
Ronalds said it was clear that a changing operating environment meant the charity sector needed to adapt its business model.
“With increasing and rapid changes in the social and humanitarian space, traditional approaches need to be augmented by agile and creative ways to solve the world’s social and humanitarian problems,” he said.
“The demand for our services has been unprecedented, particularly with severe disasters increasing and now the pandemic. This means we must find new sources of funding for social innovation, including leveraging private sector investment.”
The idea of this fund was born out of frustration, Ronalds said, about the lack of funds to take innovation to scale. Something he sees as a significant issue right across the charity sector in Australia.
He pointed to a huge gap between where most philanthropists operate, in supporting very early stage innovations, and where you can then use money, for example from government, to really scale up.
“That gap is what kills a lot of potentially successful innovations in Australia and in other countries around the world,” Ronalds said.
He encouraged other charities to look at using impact funds to support innovations that are somewhat proven but have the ability to scale and can be structured to provide a financial return.
While he admitted this mechanism is only available to larger, more sophisticated charities, he said charities who were interested should come and talk to them.
“We are absolutely looking to support the sector with this fund, not just Save the Children initiatives,” he said.
“Overtime I would hope that in Australia we will see five or 10 of these sorts of funds, run by charities for different purposes, and charities collaborating together raising these sorts funds.”
But he cautioned that the impact investing market in Australia is still in its infancy.
He said many philanthropists still seemed to struggle to overcome the granting / investing dichotomy.
“We have come across this quite a lot as we’ve gone and done pitches to philanthropists who perhaps have very large corpuses invested in traditional investments but who have expressed an interest in impact investing,” he said.
“While there’s been great enthusiasm, in many cases, the existing systems and processes that the investing committees have, have really proven to be quite a barrier for them making an investment in our fund. Despite many of them willing to give us grants.
“We still have a long way to go before we have a sophisticated group of both users of impact investment, that is both organisations like Save the Children and others, as well as investors whether they be philanthropists or mainstream investors.”
Along with Save the Children Australia, QBE is an anchor investor in the fund.
Gary Brader, QBE Insurance Group chief investment officer, said they were delighted to be able to be the anchor investor with Save The Children in the fund.
“We recognise the need for leading institutional investors to play a bigger part in investing with consideration of not only the financial returns but also the social and environmental returns,” Brader said.
Other investors include family foundations such as the McLeod Family Foundation and a number of Save the Children’s board and investment committee members.
The fund is overseen by the board of the Save the Children Impact Fund and supported by an investment committee.