Social Impact Investment Theory to Practice: A funder’s Perspective

Raewyn Jones,

WEL Energy Trust

From Theory to Practice

Social Impact Investing• ‘Intentionality’ – Does it matter?

• ‘Additionality’ – When is an Impact Investment not an Impact Investment?

• Theory of Change – What are we trying to achieve?

• Example Decision Tree for a funder embarking on Impact Investment

Intentionality

• SOCIAL IMPACT INVESTMENTS

ARE THOSE THAT

INTENTIONALLY TARGET SOCIAL

OBJECTIVES WITH A FINANCIAL

RETURN AND MEASURE THE

ACHIEVEMENTS OF BOTH

Social Investment Taskforce Forum (2014)

Additionality

• An Impact investment must provide value above what the market would provide…

– there can be an element of “greenwash” associated with the impact investment market.

Additionality

• Grants can do things that investments cannot in terms of impact…

– the question is; what are you trying to achieve?

What is your Theory of Change?

Example decision making process:6 steps for evaluating a potential ‘deal’

1. Target Outcome

• What is our Theory of Change? (Intentionality)

• Does the Investment contribute to the target outcome?

• Does it fit with our organisational Vision and Mission?

2. Additionality

•Change versus what would have happened anyway

3. Measurement

• What are the financial and social outcomes we would look for? (KPIs)

• How and why would they be measured, by whom and when?

• Who would pay for measurement? Will ‘approximetrics’ do?

4. ESG

• Environmental, Social or Governance risks or opportunities?

• What extra value can we bring to the table?

• Remember – “do no harm!”

5. Lockstep?

• Would the financial return have a positive correlation to the impact created? (Impact Investment ‘holy grail’)

• Would there be a trade off of financial return for social impact? (Social Investment)

• Is this better to be viewed from a social impact only perspective (a grant), or a combination of both (blended capital).

6. Due Diligence

• Once a 'deal' is approved, there would need to be extensive due diligence:

• Financial Modelling, get a real life feel for the organisation (internal validation), Investment Committee, External due diligence (accounting firm), final documentation, kick off!

In Summary…

Consider..

• Target Outcome

• Additionality factors

• Measurement

• ESG

• Lockstep?

• Due Diligence

• And start with your exit in mind!