The Significance of an Investment Readiness Fund in the Australian Market

At TDi, we have been advocating for an Investment Readiness Fund in Australia for many years. Through countless conversations with government, philanthropy and others in the social sector, there never quite seemed to be enough people who were willing and able to make this become a reality. In
 2014 that changed when our long term partner, NAB, stepped up to the plate and placed the first $1 million into a catalytic grant fund seeking to leverage small amounts of grant funding for targeted capacity building that would enable enterprises to take on investment.

Both NAB and TDi have experienced the lack of impact investment opportunities in the Australian market. In May 2013, we ran a forum regarding the need for an Australian version of the UK’s Investment and Contract Readiness Fund (ICRF). We continued to work both in partnership and individually around trying to strengthen investment opportunities by working with individual organisations in the social sector, to develop their capacity for investment, and strengthening the broader marketplace.

 

“Traditionally not-for-profit and charitable organisations have been able to rely on government and philanthropy for their funding… however, with the continuing decrease in available funds, another approach is desperately needed.

— Bessi Graham, CEO at TDi

 

Traditionally not-for-profit and charitable organisations have been able to rely on government and philanthropy for their funding, justifying their continuation by demonstrating the depth and increasing effects of the social problems they’re attempting to address, such as homelessness, environmental degradation, and poverty. However, with the continuing decrease in available government and philanthropic funds, another approach is desperately needed. Despite the very necessary services they provide, for many their continued existence is under threat. The increasing interest in impact investment from potential investors means that investment capital is a viable method of making these organisations sustainable, however most traditional not-for-profits and charities do not have business models that would allow them to take on investment.

The gap in the market that exists between organisations in need of funding and investors actively seeking impact investment opportunities is widely recognised. The Federal Government has previously attempted to address it through the establishment of the Social Enterprise Development and Investment Funds (SEDIF). But the last few years have shown more clearly than ever that we need to address the lack of capacity within organisations to meet the requirements of investment capital if initiatives such as SEDIF are to be successful.

We’ve had growing success in coming to agreement on what an Investable Social Enterprise (ISEs) needs to look like, and the interest from investors in engaging with these organisations is continuing to grow. In late 2014 NAB announced groundbreaking cornerstone funding to establish the NAB Impact Investment Readiness Fund. What will this fund do for the social marketplace? We envisage the introduction of this fund as the next step in helping unlock, not only the potential of SEDIF, but also the broader growing interest in the field of impact investment from a range of potential investors.

Our focus in co-designing this much-needed fund has been on making sure we create a fund that delivers solid outcomes that see significant leverage of any catalytic grant capital distributed. This fund is not solely focused on traditional not-for-profits or charitable organisations, but has instead intentionally chosen to allow a broad range of organisations to apply. We believe that a business with a social or environmental mission at the core of what it does can help solve some of society’s most complex problems, regardless of its legal structure. The fund recognises the challenges organisations in this field face when trying to simultaneously address their mission and a commercially viable business. We therefore seek to bring clarity to the parts of the business model that need assistance, and to provide necessary funding to cover those costs

]We look forward to other Funders, both government and philanthropic, contributing to the Fund and expanding its reach. We strongly believe Australia has the potential for a thriving impact investment sector, and the creation of the NAB Impact Investment Readiness Fund is a significant step towards realising this potential.

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