Uncovering foundations’ impact investing sphere

 

Zibran Choudhury

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In May, Alliance asked its readers what session they would like to hear about most at Philea Forum 2024 in a poll. The winner was ‘Uncovering foundations’ impact investing sphere’– take a look at our conference report below.

With the direct impact investing market in Europe estimated at €80 billion, there seems to be an opportunity to achieve more impact, and there was huge interest at the forum in the launch of a joint programme by Philea and Impact Europe to help philanthropic organisations incorporate impact investing approaches into their grantmaking. In this session in particular,we heard from experienced foundations on how they allocate their endowments, use their resources and explored the commonly held beliefs around impact investing and mission-related investing.

Session facilitator Pascale van Durme, of the Belgian Federation of Philanthropic Foundations, started by stating there are still only very few foundations working on Impact Investing. It’s a space that is still not known well enough. So why and how have these foundations adopted this approach?

Bridging the gap

Sybren Devoghel of King Baudouin Foundation (KBF), started the discussion, and said KBF embraced impact investing due to ‘demand from many angles and the growing larger ecosystem’. Their approach focuses on different ‘buckets’, one designed for financial returns, and the other that has a primary focus on social and environmental impact and involves more risk. Sybren explained that their first step was to get their governance on board, who may be put off by the risk and could have a completely different perspective on investing. This meant speaking the ‘same language as them, defining the concept, and what it means for their organisation’, but also to emphasise the use of a dedicated budget to mitigate the risk. The second step was to engage the colleagues who are working on these programmatic areas day in day out, as they are best placed to spot good investing opportunities, including  grassroots investments opportunities.

Marco Gervini, Fondazione Social Venture Giodarno Dell’Amore, spoke of bridging the two ‘extremes’ of giving approximately €150 million in grants per year, with investing the endowment in ESG with a compliant approach. They started on social housing two decades ago which eventually led to the formation of a foundation fully dedicated to impact investing across all sectors. In this space, they have a small endowment to experiment with ‘impact first’ business models, and then attract grants from philanthropic areas so social entrepreneurs can build sustainably when grants are difficult to get. This is a way to ‘Invest, reinvest, exit and enter into new investments’, according to Marco.

At Daniel and Nina Crasso Foundation, Benoit Mounier outlined their incremental transition to impact investing from their classical way of working, which included using an endowment of £500 million to finance their philanthropic work. The internal first step was to create a charter so their investments were aligned with their values, so investments in products like Tobacco is now excluded from all investments. The next stage was to bring coherence to their impact strategy, so within their £500 million endowment, they ring-fenced €75 million purely for impact investing. This is also split into two pots for investing, one leaning towards their global mission focusing on climate and inclusion, and another invested in funds linked to their philanthropic programme. Why this dual approach? The rationale Beniot gave is that if they want to ‘change the food system, they also need change the economy, and the global economic value chain’.

There was a common thread throughout these journeys. It wasn’t just about how to adopt a new approach to achieve impact, but how to make it work in synergy with your existing approach and allowing them to work closer together.

Expanding the toolbox and equipping Europe

All three foundations touched on the internal journeys they went through, but what about external resources and actors, and how will this joint programme by Philea and Impact Europe shape the journey of others? I spoke to project leads Peter Cafferkey (Impact Europe) and Hanna Hanses (Philea) to find out what inspired this collaboration and their hopes for the future.

Can you describe what inspired this collaboration between Philea and Impact Europe?

Hanna Hanses: I think this collaboration has been going on already for quite a while, but in a very targeted way towards those foundations who were already practicing impact investing to a certain extent. There was a realisation that we still want to work on this, but in a new way – with a holistic approach to foundations. We saw for example, the European Investment Bank, together with the European Commission, issued a study on EU philanthropic capital just last year in light of the social economy action plan. Outside of the sector, foundations are being seen as quite a unique structure in the sense that they can bridge their programmes with their investments and therefore leverage their expertise to make use of the investments.

Peter Cafferkey: For me it was driven by the needs of both members and even foundations outside of our membership. There’s a growing interest in impact investing as a term amongst foundations and pressure coming on foundations as well to look into how their endowments invested or one of the tools they can use. But it’s a mixed picture across Europe. There’s a different level of knowledge in these organisations, there’s a different meaning of terminology across countries in Europe, and there’s a different regulatory environment across all the countries of Europe. So, the real collaboration was also driven by the needs and appetites of the members.

What do you think has driven this increased interest in impact investing?

HH: I think this is to do with the bigger picture. Philanthropy is only one ecosystem. We live in a bigger world where we see polycrisis, where we have a sense of real urgency when it comes to anything that needs to be done. And I think this prompts us to think in innovative ways also within philanthropy. So, I think  we still need to see impact investing not as an end in itself, but as a means towards an end, which is ultimately to serve people and planet and to serve the societies at large.

That’s what we’ve seen in the financial sector, in terms of moving towards more ESG and CSR practices. What we’re really trying to do, is also open the toolbox for foundations so they can tap into what’s most impactful for the beneficiary.

PC: I think foundations have a unique space in the world as a voice. There’s a holder of the space as a counterbalance to some other voices in society. There’s a kind of existential threat here to the credibility of foundations and it is something that they need to guard for the future. And unless they’re looking at what all of their assets are doing and where their footprint is, they lose their credibility. So, there’s pressure externally, but I think there’s also a realisation from foundations that that they need to be looking at what their overall social mission is, and then look at not being a prisoner of capital, but just seeing it as another tool. But there’s still a little gap in knowledge and support on this. Want anyone who does want to get involved in this space, not to have to start from scratch, but learn from others  and build that way.

Could you talk more about the holistic approach towards foundations?

HH: I think foundations are in a unique position because on, one hand they are very mission driven with their programmes they make sure that they can continue to support their missions by investing their endowments. This is very traditionally speaking, because now we see many, many mixes now popping up, but I think where the magic lies, is in bridging these two and then bringing in the leadership perspective. Foundations are realising that they didn’t have to go really far in looking for investable projects, so when you enter the space it’s a journey – you have a starting point and go further. Impact investing is often  started in a very gradual way and that can mean different things and they all need to find their own way if that’s something they want to help them explore.

PC: We are in a fortunate situation where we’re responding to needs of our members. So, we’re not having to push against a closed door. I think foundations want to see how, if appropriate, they can get more benefit out of their assets and out of  their programmes and they’re open to that and innovation. It’s quite a difficult, or a unique process for each foundation. I think this is where the leadership element of the holistic approach is quite important. I mean, we’re still defining this, and we will with foundations that join us. But we see ‘leadership’ almost in two pots. I think there’s one element of leadership that’s internal and about how you as a foundation become fully holistic in your approach and how you use language, how you engage with it. And the other piece is external leadership. If you are an organisation doing this, how can you bring others on the journey with you and how can you be an advocate for change, be it regulatory or be it in practice. The truth is that there’s not that many foundations in Europe who’ve achieved this perfect holistic balance,so it would be very difficult to stand on stage and say, ‘you should all do this’. It is a learning journey for all of us and that’s why we have a non-judgmental, guiding approach.

Have there been any learnings from how impact investing is being used around the world?

PC: We have sister organisations in Latin America, Africa and Asia. So we are exposed to these conversations, so we do have that outward facing feel. And we’ve had feedback from joint members that there’s a chance here for Europe to play a leadership role because a lot of the language in the endowment impact investing space is very American focused and what they’ve been exposed to is very US-led and very mission related investing programme. So, it’s exciting that Europe has a different voice on what it means to be, an impact investing foundation.

There are hotspots of things happening outside of Europe where organisations are ahead and behind. But at the same time, you see conversations happening in, in Asia, in Latin America, in Africa that are very country specific. What we’re generally inspired by globally is the fact that global problems are happening, and we need to do something.

HH: There’s much knowledge we want to draw from other regions and things we can share for sure. But I also wanted to keep in mind that indeed, impact investing is just a tool, ultimately the problems we’re facingare global. So, I think that’s also something that we’ve observed that often when at least larger foundations were operating at an international level, they also will use impact investing approaches, and this will not always be centred in Europe. That’s also something that we want to connect in our work going forward. I think focusing on the problem, the change you want to see is the driver here.

Can you share more about the future of this programme?

PC: I see this as a start of a journey rather than necessarily tying it up to two years, three years, four years. The need is there and as membership organisations, we want to serve that need going forward. They want safe spaces to deep dive into some of these practical areas. So we want to give opportunities for people who are thinking about this, people who are doing this, people who have challenges in this to come together in specific gatherings on leadership, on endowment and on programmatic work. And that’s what we’re doing now is that’s where we’re bringing together those organisations who want to share, market build, help us design this into steering committees and provide support to help this work go. We know there’s a need and now we’re we’re just looking for those organisations that want to help us deliver on that need and magnify our impact.

HH: For us, the peer learning part and the knowledge dissemination that comes from the peer learning, but also that we observe in other organisations who are already working on this. We’re not operating in a vacuum, and this also leads me to bring in the policy perspective because as you know, we published our European Philanthropy Manifesto recently and there are elements in that. Impact investing regulations are mainly on the national level, so we work with our national members also to advance that piece. Also, Impact Europe has recently launched their own manifesto. So we’re very happy to have that collaboration when it comes to advocacy and in a more hands on way.

We have a sense that now it’s really the time to bring together the experts in the field with policymakers and to take our work on that also to the next level.

Read the new paper ‘Philanthropic Organisations using the entire toolbox for more impact’ in full here.


Zibran Choudhury, Networks and Egagement Lead at Alliance magazine

Tagged in: PhileaForum2024


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Lassina KONATE

Bonsoir , je me nome KONATE Lassina de l'association Tié , une structure de protection de l'enfant et aussi dans l'action humanitaire. Mon souhait est d'avoir une fondation qui pourra nous apporter une aide pour nous permettre de repondre efficacement au besoin des population les plus vulnerables . Nous sommes basés à Bobo-Dioulasso au Burkina Faso Merci de me repondre


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