At the launch of NAB’s Impact Investment Readiness Fund (IIRF) this month, the questions from the audience reminded me how confusing the ‘social impact’ space can be. Furthermore, how opportunities are missed when the focus is on one discipline, when many are possible, if not required, to get maximum economic and social returns.
The NAB fund targets social sector organisations (NFPs) and social enterprises that have an investment ready idea or activity and need capital (money) to achieve scale and sustainability.
Up to $100,000 is available: 70% on awarding of the grant; 30% upon securing investor interest. The grant money is to support acquisition of expert advice from firms such as Ellis Jones, who can assist in developing the business model.
When our agency first set out to brief companies and social sector organisations on shared value, one of the main barriers to take-up by companies was the lack of a business case for shared value investment. A business case of the rigour executives are used to receiving costs money and time to develop; particularly if initial validating evidence is required. So, the catch 22: ambitious CSR or Innovation managers could not get the time or budget; neither could the social sector organisations with which they needed to partner. The role for philanthropy was clear in funding a business case for impact investment.
1. Impact investment sees investors use financial capital to achieve social benefits.*
2. Share value sees business use a mix of business competencies, assets and finance to achieve social benefits.
*In some cases impact investors also contribute reputation and financial or operational acumen.
So, too, for the impact investment space. Before an investor will assign capital to a project, there needs to be a robust business model and plan, perhaps even evidence of early stage success.
NAB, and its partner Impact Investing Australia, should be applauded for its grant scheme and funding a business case for impact investment. By assigning funds to this step in evolution of social enterprise, the company is improving the potential for capital investment and also the likelihood of success as experienced advisors work with the grant recipient to do the necessary research, bench-marking, modelling and planning.
During this process, some ideas may go back to the drawing board, which also reduces the loss of capital and reputation – for the social enterprise, the investor and the discipline of impact investing which is still nascent and often misunderstood.
Many projects considering a shared value approach, in order to leverage the full competencies of a company in addition to its finance, could be expedited and strengthened with catalytic philanthropic investment. This will be an area for exploration by the Shared Value Project Social Sector Working Group.
NAB’s investment in the IIRF will create shared value opportunities for the company if it chooses to facilitate investment in the grant recipients from its private wealth, private equity, and corporate clients – or indeed, chooses to be an impact investor itself.