In a recent article, the Financial Times attributes a “surge in interest from the millennial generation” to the now >$500bn global impact investment universe – that is an annual market size figure and it is growing. In this blog we look at impact investment through the lens of one of the leading global funds – the Global Innovation Fund.Definition of Impact InvestmentImpact investing refers to investments made into companies, organisations, and funds with the intention to generate a measurable, beneficial social or environmental impact, alongside a financial return. Certainly, the leading impact investment funds take a broad view on the types of applicants that they will support and the funding methods they offer. This is no longer a ‘one size fits all’ and a distinct move away from siloed funding.
So let’s look at The Global Innovation Fund. They will grant, lend and invest (convertible loans or direct equity) to social enterprises, for-profit companies, non-profit organisations, government agencies, international organisations, and researchers in any country and from any sector. This is as broad an eligibility scope as we have seen, so how are they making their selections for awarding business funding?
The 4 investment priorities of the Global Innovation Fund
- Innovation and Impact
- Does your innovation test, challenge, or improve on business as usual? Simply put, the Global Innovation Fund must fund innovation. Your innovation could be a new business model, technology, distribution system, financing mechanism, etc. Whatever the type of innovation, you need to explain how your innovation can make it easier, faster, less costly or otherwise more feasible to tackle an important development challenge. For example, does your business model allow you to have a bigger impact on behaviour than alternatives? Is your technology cheaper? Does your financing mechanism allow you to reach a poorer income segment?
- Do you have evidence of impact? The fund is committed to supporting the acceleration and transition to scale of innovations that are backed by rigorous evidence. To that end, the fund will ask to see quantitative evidence that your innovation improves on business as usual. Often, but not always, this evidence may be generated via a rigorous randomised controlled trial or quantitative assessments that use other strategies to identify the causal impact of your approach relative to a comparable control group.
- Do you reach our target market? The fund supports innovations that benefit people living on less than the equivalent of US$5 PPP per day in developing countries, and the fund is especially interested in innovations that impact people living on less than US$2 PPP per day. GIF expect innovators to have some understanding of who their customers / beneficiaries are to show that they fall within the fund’s target market.
- Measuring success and sharing lessons learned. The fund supports innovators who are committed to evaluating their own success, with plans to collect data and feedback to help inform decisions. This includes operational monitoring and evaluation, as well as impact evaluation. Innovators from learning organisations that make data driven decisions are a good fit for the fund.
- Potential to Scale. The fund’s goal is to scale innovative solutions to development challenges that are backed by rigorous evidence. GIF only funds innovations with the potential to scale to reach millions of people living on less than US$5 PPP a day.
- Team. GIF looks for innovators with the relevant expertise and capabilities to achieve success. The fund also likes to see that your team has clear roles, responsibilities, and time commitments needed to be successful. Teams should be able to demonstrate strong knowledge of the problems they are addressing and what approaches are likely to work in the local environment surrounding their innovation (e.g. operational, geographical, political, or social context). It is especially important that teams demonstrate the ability to identify and respond to risks and changes that are likely to arise as growth is achieved. At earlier stages of development, teams must demonstrate a strong commitment to drive the innovation forward, with openness and ability to pivot or adjust their strategies as needed. At later stages of development, teams should demonstrate that they have the management, operational, and evaluation capabilities needed to test and scale up the innovation.
So – what do know about impact investment funds now?
This is a serious endeavour. In our experience in the funding market since 2009, we have not seen a more robustly structured and professional fund than the Global Innovation Fund. The detail and professionalism that this fund presents on their website and through their case studies demonstrate a long-term and strategic commitment to supporting the very best social impact ventures across the globe. With the backing of the Global Innovation Fund and other impact investment funds, your impact venture could go far.
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