Impact Partnerships, with Return on Investment
Philanthropy has evolved dramatically in recent years, changing the way individuals, organizations and foundations support the causes that concern them most. One manifestation of this evolution includes an array of sophisticated methods of investing in social causes while expecting a return, known as impact investing. Impact investing is commonly defined as investing with the intent of achieving both financial gain and social or environmental benefits. And partnerships can be key to ensuring maximum impact and return.
But what is the distinction between investments that are not bringing about substantial impact and those that are? Ostensibly, successful impact investments would bring the highest amount of return while creating the most social good. Parameters would include a similar mission and values, a vested interest in the cause, and of course, capital. However, examining deeper, it appears that the compatible partnership of two organizations, the investor and the implementer, significantly contributes to the degree of actual impact. The higher level of collaboration (i.e., the similar values, mutual understanding of the goals for the investment, compatibility) required to increase impact come in addition to the capital poured into a cause by a funding organization.
Impact investments are manifested in varying forms. In some instances, an organization or foundation makes investments in a specific issue area, such as when the Bill and Melinda Gates Foundation recently made a direct $52 million investment in the cancer research company CureVac. Global health, one of the four main focus areas of the Bill and Melinda Gates Foundation, aims to harness advances in science and technology to save lives in developing countries. Thus, the investment in CureVac is a seamless cross from developmental activities in global health to investment in research that will impact global health. A third party partnership is not necessary to bridge the gap between a philanthropic institution’s mission and the goals of the funded organization.
In many cases, an institution invests outside of its realm of work. This is the case with the Overseas Private Investment Corporation, the independent, self-sustaining U.S. government agency that oversees development finance. The agency, which aims to solve critical developmental challenges that advance U.S. foreign policy, works to mobilize capital where it is needed most by providing investors with financing, guarantees, political risk insurance and support for private equity investment funds. Thus, the agency actually acts as a partner/backer to U.S. private sector companies. In doing this, the agency is able to make more impactful investment decisions, partnering and loaning to organizations that are engaged in work that advances the agency’s mission.
This has yielded big results for the agency, which has a portfolio of over 4,000 projects in 150 countries. The Overseas Private Investment Corporation has supported over $200 billion in investment, generating $76 billion in U.S. exports and supporting 278,000 American jobs. The agency leverages partnerships in the most efficient of manners, carefully examining perspective partners to invest with and in. While there are many private sector impact investors, where the Overseas Private Investment Corporation stands out is through its strategic model of investing in already performing, effective partners from their existing portfolio and selecting new promising partners through a rigorous applicant screening process.
Recently spotlighted in the Global Impact Investing Network and J.P. Morgan Eyes on the Horizon: The Impact Investor Survey, the Overseas Private Investment Corporation was highlighted for the financial commitments it makes that aim to have positive developmental impact. The Overseas Private Investment Corporation was commended for attracting and dispersing capital in challenging sectors such as agriculture, education, and healthcare. The Eyes on the Horizon report “reveals a growing global market, with impact investments being made across all geographies and a range of sectors”.
Recently, Overseas Private Investment Corporation announced a partnership with the Latin American and the Caribbean-focused impact investing firm Global Partnerships. As Overseas Private Investment Corporation is not an implementer of projects (they provide loans), this partnership will allow Overseas Private Investment Corporation to utilize Global Partnership’s extensive portfolio of borrowers, creating more impactful investments. Leveraging Global Partnership provides a road map to Overseas Private Investment Corporation as to which organizations and projects are legitimate, with the best chance of impact and return on investment in the region.
A new fund, the Global Partnerships Social Investment Fund 5.0, will lend $15 million
to Global Partnerships to then lend to projects in Latin America. This model makes Overseas Private Investment Corporation the third party lender of the investment and allows them to expand their portfolio to enterprises that might have been too small or unaware of Overseas Private Investment Corporation’s work.
The Overseas Private Investment Corporation already has funded the Global Partnerships Social Investment Fund 1.0 – 4.0 for projects that aim to alleviate poverty through microfinance institutions. An example of a microfinance institution that Global Partners works with is Fondo de Desarrollo Local in Nicaragua, which provides families living off the electrical grid financing for solar panels to power their homes and farms.
While Global Partnerships raises funding from many different sources, its partnership with Overseas Private Investment Corporation provides the “stamp of credibility” and stability and the overall cost structure necessary to make appropriate partnerships with local organizations that are doing the ground work to make an impact in their community and world.
Another strong example of Overseas Private Investment Corporation’s work is Bridge
International Academies, which runs a network of for-profit, low-cost, high-quality schools in underserved communities throughout rural and urban Kenya. Costing about six dollars per month per student, Bridge operates 405 schools serving over 100,000 students in Kenya, with plans to expand throughout Africa and Asia. A co-founder of Bridge, Shannon May, has credited Bridge’s partnership with Overseas Private Investment Corporation as a major “[…] difference in allowing us to expand.” The original $10 million loan, made in 2013, has aided in Bridge’s plan to build and operate 237 more schools, reaching 300,000 students by 2022.
Because of the scale of Bridge’s operation, the schools impact not only the children they serve, but also the families and the Kenyan economy; Bridge is on task to create more than 12,000 local jobs in Kenya with Overseas Private Investment Corporation funded expansion. And because of the for-profit nature of Bridge, Overseas Private Investment Corporation is likely to see returns from their investment.
The Overseas Private Investment Corporation Board of Directors recently announced eight new partnerships for financing and insurance on developmental projects around the world. These projects will account for more than $1.5 billion, and will support Overseas Private Investment Corporation’s mission of development impact and U.S. working relationships throughout the globe.
Samantha Spilka co-authored this post. She is pursuing her master of international affairs at Columbia University’s School of International and Public Affairs. She holds a BA in psychology from San Diego State University and an MA in organizational psychology from Teachers College, Columbia University.