Foundations have been working to alleviate intractable social problems since long before the birth of modern impact investing.
Now, as the philanthropic landscape evolves, foundations are recognising the potential to harness the power of their corpus (their core capital endowment) to provide more than just a revenue stream to fund grant-giving. They’re recognising the potenital to invest directly in enterprises and projects that are aligned with their core mission.
The Minderoo Foundation is one of Australia’s largest philanthropic organisations, and since announcing a bulked up allocation of $250 million to impact investing, it’s playing a central role in reshaping perceptions about how foundations can influence positive change.
The mandate of Minderoo’s Strategic Impact Fund (SIF) is to invest in businesses and funds that will scale and accelerate the impact goals of the foundation. It will invest in opportunities that are aligned to any of Minderoo’s broader suite of initiatives, including; tackling modern slavery, supply chain monitoring, the sustainable ocean economy and circular plastics solutions.
OnImpact spoke with Minderoo’s Head of Impact Investing, Jenna Palumbo, about the foundation’s recent investment activity, the catalytic role that foundations can play in funding ‘the missing middle’, and the changing shape of philanthropy in Australia as more foundations explore impact investing.
Deals & Growth
The fund has so far backed a range of enterprises and allocated to impact funds. It’s invested in companies like supply chain management company Ulula, and ESG management platform Fair Supply Analytics. And it’s joined the register of US-based Working Capital Fund, and Circulate Capital based in Singapore.
“A lot of our efforts in the past 12 months went towards supporting portfolio companies on their growth journeys. This included follow-on investments, as well as general operations support to maximise impact and financial outcomes.” Jenna says.
“We were delighted to continue our support for Fair Supply Analytics, a cutting-edge ESG data provider specialising in modern slavery. Minderoo invested in Fair Supply’s seed round in 2021 and has continued our support through to their Series A led by AirTree in December.”
The SIF contienues to make new investments, but transaction volume was lower than in the 12 months reflecting market conditions. It committed a further $20M across plastics, oceans, bushfire resilience, modern slavery and cancer thematics.
Beyond Philanthropy, to Support Systems-Change
Minderoo has brought a collaborative mindset to the challenge of system-wide change, and recognises impact investing is part of a ‘toolkit’ for positive change. It won’t displace the need for grant-giving, but instead, it’s a supplement to support the work of the organisation as a whole.
“Minderoo is focused on addressing complex issues at a systems level. We have found that investments targeting systemic change are often early-stage and high-risk.” Jenna says.
The complexity, and interconnectivity of these challenges highlights the importance, and impact, that is offered by a sophisticated impact team. It’s far more than simply analysing opportunities and allocating funds, its led by a broad research focus that is adaptable in aligning capital with specific needs.
“There’s an ongoing need for investment readiness support. Here we see a strong need for the entire continuum of capital to play a role, particularly the ‘missing middle’ that sits between traditional philanthropy such as grants and commercial investment.” Jenna says.
“Grant funding is a finite resource, so we see tremendous potential for products that can recycle capital, such as repayable grants, whilst also providing support to impact-focused businesses.”
The role is as much about driving change close to home, within the Minderoo organisation, as it is in society and our economy. Minderoo prides itself on being progressive, but the team still need to prove their model of impact can contribute.
“We are working with our colleagues and partners to demonstrate how impact investing can be used as a tool to help them achieve their goals. Specifically, we’ve encouraged our initiative teams to consider sustainability of grant funding and consider mechanisms like repayable grants where appropriate.” Jenna says.
“Our team has helped set aside $3M for a Catalytic Capital fund, which seeks to use sub-commercial capital to help convert highly impactful opportunities into investable proposals. We believe Minderoo and other foundations have a role to play in breaking down the dichotomy of grant versus investment to ensure high impact projects have access to appropriate capital. The intention is for the funds to be deployed through blended finance transactions, or by funding feasibility assessments to progress ideas with high potential intoinvestment-ready opportunities.”
Foundations Move to Invest in Impact
It was only last week that we explored Save the Children’s pioneering work in adapting its charitable giving approach to embrace impact investing. While the donor-led model of a global charity is very different to the structure of a private foundation, it represents a seismic shift in perception of how organisational impact can be supported by commercial investments.
The team behind the Minderoo SIF recognises their role in this, and seek to use their position in the sector to support and lead other foundations to recognises the opportunities in impact.
“In 2022, we continued market building efforts by hosting a series of workshops with Good Wolf and Brighlight, both of whom shared practical advice and case studies on how impact investing can be embedded into foundation strategies.” Jenna says.
“It was clear foundations were at different stages of the process, but we are encouraged by the greater recognition of the role impact investing can play in generating financial returns alongside impact. We are also continuing to work closely with other foundations, both on specific transactions and on market building.”
Jenna Palumbo will be speaking at the Impact Summit 2023, on 30-31 March at the Sydney International Convention Centre. She will be part of the panel exploring; What Is Catalytic Capital and How Can It Help You? Din’t miss it, tickets are still available, details here.