Investing in the future

Industry expert Julia Balandina Jaquier explains how impact investing can introduce a new way of doing business – and provide scalable and sustainable investment in twenty-first-century education

Do you think that the UN SDG goals have been useful in providing a focus for impact investing?

The SDGs have been incredibly useful in providing a common language. That is, different types of organization can now explain what they're doing and how they contribute to the global agenda. But the issue is that the SDGs are so comprehensive and global that just about any organization can claim a contribution to at least one of the goals. The danger is that we may miss badly needed innovative and scalable solutions in the forest of SDG contributors. We need to use SDGs proactively to develop new investment and business strategies: I do not see this being done nearly enough.

How far away are we from mainstreaming impact investment?

There are a lot of encouraging signs. A lot of work is being done by many great players. But realistically, we have a long way ahead of us before we can claim that impact investing has become mainstream. What gives me confidence is the growth in the depth and breadth of investment product offering. You have impact-generating investment opportunities across all asset classes and impact themes, with various degrees of risk, return and impact. In addition to impact pioneers, large traditional investment houses are starting to come up with large impact investment funds. They may be shallower in impact, but they are incredibly important – they provide a greater legitimacy to the space, offer a broader variety of opportunities, and, can therefore, cater to more conservative investors. My greatest hope is that the smaller, catalytic and disruptive impact investments made by impact pioneers will be successfully scaled, as this is the only way to reach the targets of the SDGs.

What's your view on industry collaboration, in terms both of bringing impact investment into the mainstream and defining agreed industry standards and practices?

I think that impact investing is more collaborative than [the mainstream investment industry]. But there needs to be more collaboration to come up with universally acceptable principles, for example, for impact measurement. The Impact Management Project is a great example of such a collaborative approach. We have seen that systemic solutions to societal challenges require engagement with multiple stakeholders: investors, philanthropists and government. Naturally, such approaches have not been easy to organize and manage.

Low-income private schooling in emerging markets, and charter schools in the United States attract a lot of interest. Then, you can look at education more broadly.

Do you have a view as to where impact investing can be most effective when it comes to education?

There is a lot of excitement about using technology to provide affordable, quality education and vocational training. Low-income private schooling in emerging markets, and charter schools in the United States attract a lot of interest. Then, you can look at education more broadly. If you, as an impact investor, want to improve educational outcomes because you believe that education is the real multiplier, you can search for root causes of low educational take-up, which include, for example, lack of electrification or sanitation. Then you may decide to invest in solar home systems or sanitation solutions, as a way of reaching your impact objectives.

Have you seen certain products being developed specifically by players in the market to address some of the issues around education?

An example would be investing private equity directly into companies such as Bridge International Academies, which uses centralized, scripted teaching and school management to provide high-quality schooling, or SPARK schools that combine classroom instruction with computer-based lessons. Or buying a Higher Education Note developed by Credit Suisse or a Turner-Agassi Charter-School Facilities Fund (real estate).

Where do you think impact investment can complement philanthropic investment?

I see these sources of capital as very complementary. Impact investing can mobilize new sources of capital to deliver societal impact. Where a business solution can effectively address a societal challenge, it should be funded by impact investment, to free up philanthropic dollars for tougher problems. But grants and concessionary financing are also extremely important in funding the early stages of commercially-viable innovations to reach the proof of concept and mitigate risk.

Is it still too confusing for a potential impact investor to know how and when to place their investment?

Yes. When working with families and institutions on their strategies, I often see them being discouraged by the lack of clear guidelines. What impact do you want to make, which challenges are you keen to address? Is it important to you that your investees are aligned with your values? There is no right or wrong, it is your choice. That flexibility creates a sense of unease with some investors, as it requires deeper reflection and effort in order to articulate common values and develop effective strategies. Add to this the need to manage both financial and societal objectives, and the task can become overwhelming. I would recommend potential investors seek support from professionals or more experienced peers to successfully navigate the complexities of the field. 

How does the attitude of millennials towards impact investing compare with those of other demographics?

I believe that millennials have huge potential as impact investors. They think holistically and are not satisfied with the traditional way of separating philanthropic engagements from the way wealth is created and managed. They are also eager to make a difference early on during their lives. Another promising segment is female wealth holders, who are particularly drawn to the notion of aligning their wealth with their values. With the huge generational wealth transfer to millennials and women, the effect on impact investing could be truly transformative.

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From the ground up

Wendy Kopp, CEO of Teach For All, a network of local partners that recruit and nurture individuals into inspiring teachers and leaders, explains how community-rooted projects can inspire widescale change 

How does your organization encourage education?

We aim to develop collective leadership to ensure all children can fulfill their potential. The fact that the circumstances of a child’s birth predict its educational outcomes is very complex, and solving this will require many changes, from within education and outside of it. It will require leaders at every level of education system and policy, and across sectors, who have an understanding of what needs to change and a deep commitment to making those changes. The 49 network partners of Teach For All – from Teach For Pakistan to Teach For Nigeria to Ensina Brasil – are working to develop this leadership in their countries. They recruit and develop their nations’ most promising future leaders to teach in their under-resourced schools and communities, and, with this foundation, to work with others, inside and outside of education, to enable all children to gain the education, support and opportunity to thrive. 

How do you define “quality education”?

Our work focuses on developing students into leaders who can shape a better future for themselves and all of us. We are focused not only on raising academic proficiency levels, but on growing kids with the sensibilities and commitment to also be, for example, environmental stewards. 

Our network partners co-create visions for student success with local stakeholders: parents, educators, employers. From Haiti to Armenia, they have been engaging these stakeholders in the neighborhoods where they work to ask: given the local challenges our kids face, given our aspirations, and the opportunities, what is our contextualized vision for students to shape a better future for themselves and all of us? By the time the kids are 25, what do we want to be true? That's the starting point, then we work backwards and say, "what does that mean for the outcomes we need to work towards?" 

To what extent do partners in the network tailor the way they work to the situation in different countries?

We share a common purpose and unifying principles across Teach For All, but network organizations contextualize everything. We deeply believe in the need for local rootedness in education – for developing approaches rooted in local context, culture and history.

At the same time, there are real similarities in the roots of the issues that we are addressing. Meaning the most marginalised kids in any given country are facing many extra challenges, including poverty and discrimination. They show up at schools not designed to meet their needs. Their circumstances are more similar to each others’ than to those of the more privileged kids in their countries. The silver lining is that it means the solutions are much more transferable than we've assumed, which has led Teach For All to invest significantly in a platform that enables our network partners’ staff members, teachers and alumni leaders to learn from each other – so that they are both locally rooted and globally informed.

Aside from investing in knowledge sharing infrastructure, where else could investments make a difference?

Philanthropic investment could make a big difference to local non-state actors – organizations like the network partners of Teach For All. Right now, development aid goes to governments and international NGOs that can commit to massive scale and short-term quantifiable results. But governments and international actors can’t change things alone. The development and philanthropic communities need to get their heads around the question of how we are going to get investment into locally-led civil society organizations which are so critical in demonstrating what’s possible, in advocating for needed changes, and in developing the local capacity necessary for sustainable change. These non-governmental organizations have the freedom and flexibility to think differently, can prioritize depth over breadth, and take a long-term view. They are a vital piece of the puzzle, but right now, there is very little avenue in low-income countries for really good local leaders to gain access to the funding they need to start and scale their enterprises. 

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