Recommendations:
The working group aims to establish a list of actionable recommendations as a starting point for the group for further action. Based on the challenges outlined above, potential recommendations are:
Tax framework and mandates
- Focus on what might unlock impact investing strategies from a tax framework perspective; clarity around current tax legislation or new enabling legislation.
- Historically, a significant number of BBBEE foundations have been constrained by sponsor companies in terms of where/how they invest, this included the focus areas, asset allocation, diversification, etc. The working group would potentially benefit from developing an engagement strategy with sponsor companies and the trustees of these foundations.
Encourage leadership: Support the development of training manuals, recommendations, workshops, events, and case studies to identify the style of leadership that it takes to integrate a very specific talent pool within a foundation.
Developing skills: Beyond a converging skill set of finance and social and environmental impact, foundations will require additional expertise in risk management, legal, and other areas when embarking on the impact investing journey. The working group could support the development of courses, workshops, and other knowledge- and skill-building resources.
Increased pipeline: Focus on increased uptake of blended finance models, where foundations’ assets could be used to:
- Collaborate with traditional investors to share or mitigate risk
- Test nascent models such as guarantees for investors
- Set up pay-for-success models such as impact bonds or outcomes funds
- Demonstrate the effectiveness of investing for impact strategies by aligning their endowment’s investment mandate to their foundation’s philanthropic mission
Increased support infrastructure: For investment advisors and investment managers, additional multivariate longitudinal studies on the performance of investing for impact portfolios in South Africa may be needed to provide impetus to the argument.
Collaboration with the impact capital supply working group to further the linkages between foundations and mainstream markets. This also ties to a further uptake of blended finance models
Projects:
Research and engagement on enabling policy for foundations to participate in impact investing transactions
Awareness-raising and knowledge building
Development of a pipeline of opportunities for foundations to invest in and/or learn from
Objectives:
With the right tools and knowledge, South Africa’s endowed philanthropic foundations could use their full asset base to leverage traditional capital pools toward market-based solutions. These solutions address key socio-economic challenges of inequality, unemployment and poverty using investing for impact strategies and blending models. While gaining traction abroad, South African foundations have not yet fully exploited this opportunity.
The deliverables of this working group are to develop enabling policy recommendations, materials, guides, tools and/or frameworks that foundations could use to effectively use investing for impact strategies and blending models. The working group seeks to support the following outcomes:
Increase the supply of capital available for high impact enterprises and projects through foundations by addressing the constraints currently limiting foundations’ uptake of impact investing strategies
- Increase the total supply of capital that is demonstrably spent on enterprises and projects that directly address the NDP/SDGs
- Increase in amount of capital across risk return spectrum particularly patient, flexible, risk tolerant capital
- Increase the number of foundations who use their investment capital for impact investing strategies
Create an enabling environment to increase the deployment of impact investment
- Increase the number of foundations supporting the development of impact investing
- Increase the supply of capital to market building initiatives
Increase use of outcomes based contracts and outcome funds
- Increase use of pay for performance and outcomes based instruments including social impact bonds
- Build national outcome fund (eg Foundation Phase Literacy Fund linked to Africa and Middle east Education Outcomes Fund
- Leverage public sector and international funding for outcome funds
