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Philanthropists and social financiers buddy up for impact

There are more than 20,000 social enterprises and 54,000 registered charities in Australia that have traditionally relied on philanthropic resources for funding. In the past they’ve been considered too too risky or unprofitable for mainstream capital. But grants are limited and the market is slowly shifting towards impact investment capital – social finance is an opportunity that many are starting to consider for greater financial independence and sustainability. It means that the demand for innovative social finance models and new capital structures is increasing. Transactions involving blended capital stacks with different risk profiles, or grants coupled with investment on the back of meeting key performance indicators such as Social Success Note structures are becoming more popular.

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SEFA is at the forefront of developing these innovative finance models in Australia. Our recent collaboration with the Vincent Fairfax Family Foundation (VFFF) led to us co-financing Tender Funerals, a social enterprise providing transparent and affordable funerals. VFFF seeks to have 5% of its corpus (approximately $9 million) invested on a mission aligned, impact first basis by 30 June 2017. We also recently co-hosted a series of Foundation Roundtables to explore new types of finance models for not-for-profits and for-purpose organisations that leverage the impact of the philanthropic dollar.

The first roundtable meeting in May was hosted by SEFA and VFFF. We shared the Tender model and opened up the conversation of partnerships between philanthropists and investors as a possible solution to close the funding gap, seeking to clarify foundations’ expectations about impact investing. The second meeting was held in mid-July and involved more in-depth discussion on two topics: matching platforms for grant or impact investment opportunities; and a shared resource that originates and structures blended transactions to create partnerships between philanthropists and impact investors. Case studies and important learnings were also shared by Dr John McKinnon, who sits on a number of non-profit and social enterprise boards utilising his experience in both finance and international development.

The Roundtable participants have proposed to meet on a two to three monthly basis with a view to developing a matching platform in collaboration with Impact Investing Australia and possibly pilot testing a shared resource with select transactions. The next Roundtable will be hosted by JB Were in October and will have the R.E. Ross Trust share their impact investing experience.

If you’re interested in participating in future meetings, please contact Hanna Ebeling, hanna.ebeling@sefa.com.au.

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