The social impact investment manager, For Purpose Investment Partners (FPIP), has announced the first close of its first fund at $67 million. With sights set on the fund reaching $150 million as part of its second close later in the year, the team says they’re confident that super funds and other institutional investors will continue to engage with their model.

Founded in 2018 by Michael Traill, FPIP is a not-for-profit investment manager focused on funding social enterprises and infrastructure.

The round saw strong interest from a disparate group of more than 100 investors, from family offices, high-net-worth individuals, foundations and super funds. The continuity of the organisation’s mission saw a number of investors following-on from commitments to Catalyst Education, which was acquired by FPIP last year, outside the fund.

In recognition of Michael Traill’s influence and leadership in the space, some investors in this round can trace their linkage back to support for the purchase of ABC Childcare Centres in 2010. This deal created Goodstart Early Learning and is widely viewed as the birth of large-scale impact investing in Australia.

With the first milestone of $67 million, Michael Traill suggests the second round should push the fund towards $150 million.

“It is critical for our goal of growing the large- scale Australian impact investing market to establish a fund and to have the funding access to move from a ‘deal by deal’ capital sourcing basis. We are delighted that we have attracted a range of new investors to the pioneering investment opportunity of SIF I which offers a portfolio of social impact investments in our target sectors, in a unique social purpose entity with a not-for-profit investment manager. There is a real sense that for many clients the initial investment commitment is a ‘toe in the water’, and this gives us great confidence in the capacity to build on the foundations of the first close and in line with meeting our first close target, to achieve a second close target that builds a fund size of around $150m.”

The team will focus allocations with an even split between real asset-backed investments and investments in operating companies. They’re targeting returns of 9-10% after fees.

A 10% disbursement has been identified, to support specialist disability accommodation (SDA) provider Blue CHP. The funding will support the acquisition of one completed home and three development sites.

Impact Measurement & Management

The challenge in working on the ‘social’ side of the impact investment space is that impact measurement depends far more on qualitative factors, rather than quantitative factors which flow more readily from a focus on environmental impacts.

FPIP haven’t shied away from this issue, recognising the opportunity to develop processes and frameworks that can help the sector scale.

Harry Breidahl, who joined the FPIP team as investment manager in 2020, explained that when assessing a potential investment the team’s social impact due diligence is managed through a bespoke framework.

They first look for a robust theory of change, that is both testable and measurable. They look for additionality, as well as the potential for depth and scalability of the impact factors. And finally, they assess any potential negative impact outcomes and how they can mitigate or protect against the risk.

“We believe this framework that we have developed is robust, and enables us to discuss whether an investment meets our impact objectives fairly quickly.” Harry explains.

“We have, as an example, turned down investments that had limited impact additionality, where there was an abundance of capital providers and where our capital and expertise could provide limited additional benefits. Catalyst Education is a fantastic example of a slam dunk on all of these four areas we look for during  our assessment, and, we believe, have added significant additional impact than could have been delivered under its existing ownership by connecting the business with organisations like Generation and Uniting to create game changing partnerships in the VET sector.”

From these initial impact assessments, the process of impact measurement and management takes on a different focus once an organisation is acquired and included in the portfolio. For FPIP, they found that the well-known IMP and SDG frameworks were too broad, so they went deeper, aiming to offer investors oversight of both the unique impact characteristics of individual organisations, while also aligning with framework norms to allow portfolio and fund comparisons.

“While we will link our performance and impact assessment to frameworks such as the IMP and UN SDGs for the benefit of our investors that do wish to aggregate their impact, we do not believe this by itself goes far enough.” Harry explains.

“Our focus is on growing impact and it is important to have in place an impact measurement and management strategy that’s embedded through the whole investee entity. Given this, once we have made an investment, we will engage management and staff to help design and implement a detailed Social Impact Measurement and Management framework, tailored to their business.”

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