Global Steering Group plans twin impact funds of $1 billion each
New Delhi: Global Steering Group for Impact Investment (GSG) plans to launch two outcome funds, each estimated to reach up to $1 billion by October, to provide social enterprise initiatives in India greater access to investment capital.
One fund, the India Education Outcomes Fund (IEOF), will aim at improving the quality of K-12 (kindergarten through Class XII) education, while the other, the India Impact Fund of Funds (IIFF), will look at other developmental programmes.
GSG’s global chairman Ronald Cohen said the mechanism of outcome-led funds provides accountability of capital and incentives for organizations to focus on achieving results. It also creates an innovative ecosystem for development activity.
The twin outcome funds will seek to bring private capital with the discipline that it brings to support government policies in important (intervention) areas, the British venture capitalist said.
“That is what marks our new paradigm today that investors are prepared to optimise risk. They are prepared to invest in securities like social impact bond and fund, and if you can provide incentive to them which gives them a shot at making something but combined financial and social return in an attractive mix there is potentially huge amounts of money (for investment),” said Cohen.
According to Amit Bhatia, GSG’s chief executive in India, investment in the two outcome funds would come from different sources.
For IEOF, the potential stakeholders include bilateral agencies, philanthropists, local and global institutional donors, corporate social responsibility (CSR) budgets and government institutions.
IIFF will raise anchor funds from Indian diaspora and high-net-worth individuals domestically. These outcome funds would provide investments for both for-profit and non-profit education service providers.
For the IEOF, which would especially be focused on enhancing the government school system to deliver contracted outcomes, potential interventions include school readiness, school to workforce transition, dropping out of girls in secondary school, disability inclusion enrolment.
“We have selected nine interventions where we want the philanthropists to invest,” Bhatia said, adding that the focus on education outcomes is to channel more impact investment to achieve the UN Sustainable Development Goals (SDGs)—which seek to ensure inclusive and quality education for lifelong learning.
Cohen emphasized that the interesting aspect of the Indian “ecosystem” is the government’s decision to introduce a CSR law that mandates companies to give 2% of their profits for charitable and development initiatives.
The decision, according to the GSG head, has very important positive implications for raising the outcome funds effort because the CSR law is in principle in line with GSG’s efforts to establish an effective vehicle for outcome based philanthropy that pays on the results achieved and encourages investments to come in for achieving those results.
About the growth of the social and development impact bonds in India, Cohen noted that the sector has moved from “proof of concept” to replication and scale. “There are several examples of social impact bond in education sector like the Educate Girls bond in Rajasthan, which was small but transformational and a good example of what can be achieved,” he said.
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