An impact finance expert delves into some of the bold visions being adopted in funding social change in India in partnership with the British Asian Trust.
India is booming with bold visions. From space to sanitation, there is an impressive collection of big ambitious goals. And the capstone of these campaigns is the New India 2022 vision. It helps shape and guide India towards a nation that is prosperous and uplifts all Indians.
Bold visions matter. They point people in the direction of the possible. They awaken citizens to their own potential. If the vision is big enough, it will surpass all available standard ways of doing business and spark breakthrough innovations. This can be the window in which great strides are made. It can also be the same zone where ideas can stumble and stir up the naysayers. Change is challenging. It is a constant effort at cracking the code on problems and unlocking possibilities.
Clarity, Commitment + Collaboration
Clarity, commitment and collaboration come together and form the backbone needed to take a vision and make reality. It is these core values that drive the Tata Trusts. The Tata Trusts starts with clarity of its purpose to uplift 100 million Indians by 2020.
The Tata Trusts knows the importance of commitment. For over 100 years the Tata Trusts have worked towards an ever-better vision of India. And it has done this through building a platform of over 450 partnerships that reach millions of households across 17 states and 170 districts.
Size the Solution to the Challenge
With the new wave of bold visions that include the UN's Sustainable Development Goals (SDGs), there is a new question that everyone from the government, philanthropic and private sector needs to answer. How to fund this level of change Current philanthropic and government resources fall significantly short of the mark. The UNDP places the funding gap at $2-3 trillion dollars per year for the next 12 years in order to fulfill the SDGs.
The emerging answer to this funding question is impact investments.
Cracking the Code on Impact Finance
is an emerging class of financial tools that considers both financial returns and social impact. This approach to measuring value creation goes beyond the traditional focus on only producing a financial return. And in other parts of the world, there is serious momentum building around impact investments.
The Global Impact Investment Network estimates $228 billion has been placed into impact investments in 2017; double the year prior. And US Trust, Bank of America research indicates that over 76 per cent of millennials see investments as a means to express their social values.
Traditional finance houses are all moving into the space and that includes institutions like UBS, Goldman Sachs, Northern Trust and Morgan Stanley. Indian players included Aavishkaar and Social Finance India.
The delta in volumes, the dramatic shift in what drives the rising class of investors and the leadership at traditional finance firms is sparking the innovative spirit. One of the innovations is the Development Impact Bond, also known as a DIB.
DIBs bring an entirely new dynamic to the Indian donor community. The mechanics of a DIB flip the script on traditional philanthropy. In traditional philanthropy, funders take all of the risks on their shoulders. They spend a significant amount of time, effort and energy on looking at the inputs invested into a charitable partner. If the programme works out well, everyone is happy. But if a project fails to deliver, both the charitable partner and the donor lose out.
DIBs bring a few more actors into the equation. The first players they bring in are investors seeking a financial and impact return. Here traditional investors are willing to front the capital required to deliver a pre-agreed upon social impact. A third party evaluates the outcomes. If the objectives are realised, then an outcome funder steps up and returns the investors' capital with a small financial return. In effect donors shift the risk to the investor. If the project fails to deliver, the risk investor absorbs the loss of capital and donors are able to redirect their preserved capital towards another initiative.
This is a compelling model. India is taking a leadership role in advancing Development Impact Bonds at scale. The world's l
has been launched in India in 2018. It is called the Quality Education India
. Through the vision and persistence of the British Asian Trust and the UBS Optimus Foundation, a committed collection of philanthropists came together to advance this DIB. This includes the Michael and Susan Dell Foundation, Comic Relief, British Telecom (BT) and the Tata Trusts.
Powering Platforms for Impact
PwC estimates that the asset and wealth management sector is set to grow to $145.1 trillion under management by 2025. As the top firms respond to their clients' demands for impact investments, there is a need to activate impact platforms.
UBS, which has $2.4 trillion under management, has pioneered in this space through its commitment to the UBS Optimus Foundation. The
is activating its convening power. As the impact finance sector takes off, the next challenge will be how to effectively deliver outcomes at scale.
The Tata Trusts' approach is to embrace the power of platforms. The Tata Trusts is supporting platforms that can help mobilise resources at scale. This includes a recent commitment to Social Finance India (SFI), which is a new catalytic impact investment intermediary. SFI's first two products will be the India Impact Fund of Funds (IIFF) and the India Education Outcomes Fund (IEOF). Each are looking to mobilise $1 billion respectively.
In addition to empowering other platforms, the Tata Trusts embraces transforming itself from being solely a grant-maker into opening up its direct delivery channels as an impact platform.
With the abundance of bold visions driving India forward, this is a vibrant and unique moment In India's history to take action. Every organisation needs to ask itself how to play its part, unlock new financial resources and scale up impact platforms. Together the New India 2022 vision will be realised.
Michael T.S. Lindenmayer is the Special Advisor for the Tata Trusts. He is focused on impact finance, technology innovations and scaling impact at scale-through partnerships and collaborations.