The pioneering impact fund from Save The Children (STC) Australia continues to flourish, and its vindication of the hard work done by its founding team.
The original fund has deployed more than half its funds, and the pilot project was so successful that a global platform has been launched to expand the investment model.
It’s been a flurry of activity, but all along the journey the mission has been clear, driving better outcomes for children everywhere.
OnImpact spoke with Julianne Wilkin, who is Head of Impact Investing at STC Australia. She had just landed back in Australia from a trip to Kenya meeting with portfolio companies. She gave us an update on deals, the progress of their initial plan for rolling out fund 1, and the exciting news of follow-funds and the expansion of STC impact investing to a global audience.
A Successful Pilot
The first fund raised $7.5 million and is so far 60% deployed across eight investments and seven companies.
It’s proven-out the core questions that this pilot fund was founded on, exploring whether there’s a big enough market for a deep-impact, child-focused, investment fund?
“We still haven’t found any others in the world that are comparable, that are actually both commercial plus impact, and child focused.” Julianne says.
When the fund launched, there were suggestions that they’d struggle to find sufficient pipeline. Instead, the team found themselves investing into a blue ocean of opportunity that was crying out for investors with specialist skills.
“What we found is that there’s plenty of opportunity. In the last year alone, we’ve reviewed nearly 300 opportunities, and they’re all really good social enterprises that are focused on children, health care, child protection, education and other enablers. All related to strengthening communities around children.” Julianne says.
Leveraging STC’s Global Platform
Charities don’t have large resources to spare, so STC needed to leverage their global footprint of experts on the ground, to gain exposure to opportunities and market intelligence.
It’s a valuable resource, but it’s one most global charities have access to. The difference is that STC applied a dedicated investment lens to the data.
“We have people on the ground in 120 countries, and many of them have helped us with our due diligence, as well as identifying potential deals.” Julianne says.
“I was at the Sankalp Conference in Nairobi last week, and I’m fairly sure I was the only Australian there. Even so, people were approaching me, and they knew about the work we’ve been doing. They knew of our unique experience in this space, and automatically they know that we’re in this for the right reason. This really helps, no matter whether it’s Africa or anywhere else, we have credibility on the ground.”
In the same trip Julianne was able to meet with one of the fund’s portfolio companies, Zeraki.
“It’s an amazing enterprise that’s built an app that makes it really easy for schools to manage attendance, communication and general admin. When we initially identified them as a target we were able to engage our education team in Kenya to look at the product. They understand the Kenyan school market better than anyone, and they really liked it. Since then, Zeraki have just gone from strength to strength.”
Strong Financials Ensures Sustainability
An important part of proving out the thesis around the fund was financial sustainability. This was never intended to be concessional, and so far the fund is supporting itself.
“We’re only two years into a ten year fund, it’s still early days, but so far the signs are really good.” Julianne says.
“We’re very patient investors, we don’t expect any dividends, we’re just looking for capital growth, and growth really in the number of children that we reach.”
Save The Children Australia will launch a second fund soon.
Global Fund Expansion
The success so far was only proving out the pilot, the team now have their sights set on global expansion.
It’s important to note that the work we’ve discussed so far was launched by Save The Children Australia, and led by Paul Ronalds. Paul’s vision and determination to get the project off the ground has been vindicated, and he has now gone on to launch a global platform called Save The Children Global Ventures (SCGV).
The group has hired ten new people, and is set to launch a commercial impact fund based in Europe. It will have the same remit, with aperture narrowed to providing education and empowerment to children.
They’ve also hired someone in Nairobi to run a donor based fund. The return threshold for this third fund will be lower, but the impact expectations will remain high.
“By the end of this year, we’ll reach close to $80 million in funds under management across SCGV’s impact investments.” Julianne says.
Charities Can Be Investors
During and after the pandemic, charities were hit hard. At a time when they most needed resources to help their beneficiaries and communities, donations dried up.
These funding challenges had been brewing for charities for a long time, but the pandemic brought them to a head.
Impact investing is one alternative avenue for generating sustainable revenue, while maintaining vital mission-led projects and enterprise support.
This was one of the driving forces behind STCs pioneering work, and it’s not gone unnoticed.
“In just the last week, I have spoken to four of Australia’s largest charities about what we’re doing here. There’s a lot of interest in what we’re doing, and I think they’ll all follow, in some form or other.” Julianne says.
“We’re obviously sharing with other charities what we’ve done, and more than happy to bring them along with us on the journey.”
STC received plenty of push-back when they were in the planning stages. Other charities made it clear how risky it seemed. But as with most things, execution is just as important as the initial concept.
The founding team of Paul Ronalds and Laura Scott made the pragmatic decision to lead with a small, pilot project. They would manage due diligence and investment management in-house. They would test and learn, and they’ve been rewarded.
“We always felt this model of running it internally, and starting small, would produce better results for STC and for our mission. We were hesitant to start really big without the internal test case. I think this model is one that others could follow. It takes time, but it’s cautious and pragmatic, which is reflective of a charitable organisation.
Julianne will be attending the impact summit at the end of March, and CEO of Save the Children Global Ventures will be speaking.
Paul Ronalds will no doubt remind us that charities are the original social entrepreneurs and social investors. We want to help everybody recognise the breadth of opportunities to drive impact, and that it doesn’t stop at grant-making and funding projects.
As Julianne says, “we shouldn’t just leave it to the banks to do social impact investing. Charities can show them a thing or two about measuring and delivering impact.”