Social investment Clive Pedley CFRE FFINZ Director CEO

Social investment Clive Pedley, CFRE, FFINZ Director & CEO, Giving Architects Ltd

Some key definitions Global Social Impact Investment Steering Group ‘Impact investment optimises risk, return and impact to benefit people and the planet. It does so by setting specific social and environmental objectives alongside financial ones, and measuring their achievement. ’ Social Investment Agency, Ministry of Social Investment ‘Social investment is about using data and evidence to improve the lives of New Zealanders by investing in what is known to create the best results. ’

What to take away from this session 1. Better understanding of social investment and impact measurement 2. Better understanding of social impact investment opportunities in the funding spectrum 3. Introduction to tools that will help get you started on developing impact measurement and an impact investment proposition

Some key definitions Cabinet's definition of social investment (2015) Putting the needs of people who rely on public services at the centre of decisions on planning, programmes and resourcing by: • Setting clear, measurable goals for helping those people • Using information and technology to better understand the needs of people who rely on social services and what services they are currently receiving • Systematically measuring the effectiveness of services, so we know what works well and for whom, and then feeding these learnings back into the decision-making process • Purchasing outcomes rather than specific inputs, and moving funding to the most effective services irrespective of whether they are provided by government or non-government organisations (NGOs)

The common theme is impact measurement

The common theme is impact measurement The measurement of change to society and the environment that follow from outcomes that have been achieved. Not outputs and not the immediate outcomes, which although essentially lead to impact, are not the intended impact.

NFP marketplace overview • Busy and crowded sector • Over 100, 000 non profits including 27, 834 charities – 1101 environment & conservation registered charities – 2052 community development registered charities • Donor acquisition and retention is becoming more difficult • Funders are all oversubscribed, both voluntary & statutory • Increased needs in society that our community want sorted

Local giving context • Charity Aid Foundation World Giving Index – New Zealand #4 (#3 by 5 year average) but “every western country in the top 20 has decreased its score this year” – Oceania remains world’s most generous continent • NZ charity sector a $20 bn+ pa sector – $3 bn donated pa, 55% from individuals, only 3% from business – Sector growth has come primarily through Govt contracts • Asset base within the NFP sector uneven ⁻ 85% of assets owned by 15% of charities

Social enterprise overview • ‘Globally, social enterprise and impact investment are creating hybrid markets and new forms of entrepreneurship, innovation, and capital. ’ – Akina Foundation • ‘Four things we need to do well … within 5 years’ – Bill English – Build skills and capability, and provide growth support through all stages of social enterprise development – Build a market for impact investment where there is financing for both innovation and growth – Create a marketplace for impact – Establish a sector infrastructure where social enterprises are connected to each other

Social enterprise overview www. impactinvestingnetwork. nz

The value of impact measurement • Increasingly, a basis for donations, funding or investment • Demonstration of impact to key stakeholders • Accountability & transparency • Local, regional, national and international benchmarking

The value of impact measurement • Funding is constrained, investment is not • Impact investment is capital that provides a blended return • Providing investors with sound basis for financial return sacrifice, and/or risk

Considering the Case for Support INVESTOR/DONOR CENTRIC (Meeting needs, not having needs) Sufficient to inform and introduce (organisation and/or project) • • Compelling Urgent Rational Emotive • Problem • Solution • Transformational impact Accountable, Transparent, Impact/$$$ ROI

The journey to greater impact www. thinknpc. org – NPC’s four pillar approach

The four pillar approach A solid foundation is essential Good Leadership Buy in from senior staff Supportive Board Strong commitment to the value of impact measurement • Investment in • Time • Energy • Skills • • • www. thinknpc. org – NPC’s four pillar approach

The Impact Value Chain

Closed Loop Fund – www. closedloopfund. com – a $100 m fund delivering blended value

Qualitative & quantitative data Type of findings Source of data Example finding Qualitative data Statistical estimates for the prevalence of views, attitudes & experiences Database & business records, delivery results, questionnaires - 26% increase materials diverted from landfill - 8 FTE jobs created Quantitative data Detailed understanding of how & why an intervention has led to change In-depth interviews and focus groups, story telling Customers had a deep understanding of environmental policies enacted by our service Common quantitative methods & tools • • Surveys, questionnaires Psychometric scales Case work tools / records Statutory data Common qualitative methods & tools • • Interviews Observation / description of habits & cultures Focus groups Anecdotes & feedback

Assessing impact investment options • Procurement – – Within the social enterprise ecosystem Corporate Local Government Central Government • Investment by trusts and foundations – mission-related • Investment by investors – blended value – Wide variety of instruments & tools, early days in New Zealand • Social lending – fixed repayment of capital with interest • Pay for success / outcomes contracts – Social impact bonds

Assessing impact investment options The right capital at the right time: • Ideation and creation – typically sweat equity • Start-up – typically grants or partnership • Consolidation and growth – typically grants • Scale and expansion – typically investment All require or significantly benefit from evidence-based measurement of impact

Plan your journey • Be crystal clear about your ‘Theory of Change’, including data for evidence and a compelling Case for Support • Understand the opportunity to provide ‘blended value’ • Be clear about the business model, use of capital and return to investors, including any return tied to impact measurement • Understand what sort of capital you need and when • Know the needs of your prospective funders and investors • Map your processes through the ‘Impact Value Chain’ and take your key stakeholders on the journey