Nesta and (Social) Impact Investing

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Nesta and (Social) Impact Investing

  1. 1. Nesta and (Social)Impact Investing Presentation 26 November 2012
  2. 2. • 14 year history of backing innovation in the UK • research, programmes, inv estment, skills • £300m endowment • registered charity, innovation for public benefit 2
  3. 3. What is impact investment? • An old idea: first building societies c1770 • 2000 – 2010: access to capital for social sector • Our definition of impact investment is: “investment with the primary goal of achieving positive outcomes for individuals, communities or society as a whole, and with a secondary goal of achieving financial returns for investors” © Nesta Investment Management | Nesta Investment Management LLP is authorised and regulated by the Financial Services Authority
  4. 4. Economically and culturally: we cannot afford business as usual Public expenditure needs to rapidly reduce Source: UK Budget, 2012 But complex problems will be a drag on the public sector and the economy as a whole anyway Source: Office for Budget Responsibility, 2011 CONFIDENTIAL - NOT FOR DISTRIBUTION
  5. 5. State Social Sector Private Enterprise Citizen
  6. 6. Why does Nesta do work in this area? • Pressing need for social innovation • Investment is needed to fund: – the creation of new social innovations; – to support their development and testing; – to scale up those innovations that work. • Just like other innovation really • Nesta has been working to build the field…. © Nesta Investment Management | Nesta Investment Management LLP is authorised and regulated by the Financial Services Authority
  7. 7. Our work in impact investment © Nesta Investment Management | Nesta Investment Management LLP is authorised and regulated by the Financial Services Authority
  8. 8. Impact investment is a tool to drive social innovation, not the goal in itself • Pressing social issues • Reorganised public service markets and changing terms of trade with state • Increased use of technology driving scale and margins CONFIDENTIAL - NOT FOR DISTRIBUTION State Social Sector Private Enterprise Citizen 8
  9. 9. Feast or famine? Either way, not a balanced diet 9
  10. 10. Seeing the impact in impact investing Output: a measurable unit of a product or a defined episode of service delivery directly produced by an investee’s activities. Impact: the effect on an outcome that can be attributed to the output. Impact may be positive or negative, and through high quality evaluation can be quantified. Outcome: an observable, and measurable, change for an individual or organisation. Impact risk: an assessment of the certainty that an output will lead to the stated impact. Our Standards of Evidence are used to assess impact risk. CONFIDENTIAL - NOT FOR DISTRIBUTION 10
  11. 11. Investing in what works…. Impact Risk High Standards of Evidence for Impact Investment Low NII1 creates Public Benefit through its investment by: • Delivering impact • Reducing impact risk 5 4 Some investments will underperform • And growing output (not shown here) 3 2 We invest in innovations We won’t invest here 1 Negative Neutral Positive Impact Potential CONFIDENTIAL - NOT FOR DISTRIBUTION 11
  12. 12. Nesta Impact Investments 1 Type and focus  Start-up and early growth finance for innovative social ventures  Investments in range c£150k - c£1m in any funding round  Ageing well Target impact sectors  Learning and employability of children and young people  Community sustainability Target size £25m , first close October 2012 at £17.6m Fund term Eight years + extensions Investment period Four years CONFIDENTIAL - NOT FOR DISTRIBUTION 12
  13. 13. Nesta Impact Investments: Investing for Public Benefit in the UK Outcomefocused Inclusive Affordable Accessible Sustainable • We believe it is possible to meet the requirements of programme related investment whilst investing in a range of entities. • We do not favour charities over companies or vice versa • We must see a commitment to each of the criteria above. CONFIDENTIAL - NOT FOR DISTRIBUTION 13
  14. 14. Investment Criteria • Investing in social ventures: – whose products or services have a measurable effect on one of our target outcomes; – with innovation, and often technology, at the core of their product or service – with strong business models able to generate sustainable returns on capital; – whose approach is scalable to meet a significant proportion of the need and demand they address – with a strong management team capable of delivering on ambitious plans. © Nesta Investment Management | Nesta Investment Management LLP is authorised and regulated by the Financial Services Authority 14
  15. 15. More information www.nestainvestments.org.uk © Nesta Investment Management | Nesta Investment Management LLP is authorised and regulated by the Financial Services Authority

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