To launch Save the Children Global Ventures, we invested some of our own funds, as well as funds from private sector partners like insurance giant QBE. We have made investments into education, health and child protection enterprises closely aligned with Save the Children’s mission and expertise.
One of the investments was in life saving social enterprise ThinkMD, a business that has developed smart software that helps frontline community health workers in places like Bangladesh improve maternal and child health diagnostics.
Peer-reviewed research found that when using the technology, less-educated community health workers are between 90-95 per cent as effective as US doctors in diagnosing such issues. We are now rolling out this technology across more than 50 countries.
But of course, the ultimate litmus test of “impact” was to ensure that the child’s life was saved and this relies on more than just an effective diagnosis. It requires having access to the right medications and the expertise to ensure the right medication is taken the right way in order to be effective.
All these variables, and many others, will ultimately determine if we can save the lives of more children in some of the poorest parts of the world.
This understanding of impact investing and subsequent reporting, is a world away from what the Australian investment community has so far achieved in its environmental, social and ethical investment.
While Vanguard self-reported the failures in its ethical bond index fund, it is almost certainly not alone.
Tighter policing of ethical funds is needed and so is better regulation and reporting regimes.
Put simply, traditional environmental, social and governance (ESG) approaches don’t address the heart of the problem. Instead, we need much more capital to flow to innovative and entrepreneurial approaches that help us dramatically shift the dial on the most significant environmental and social challenges of our time. This is why policies that encourage impact investing are critical.
The federal government’s move to compel big companies to track and disclose their carbon emissions and those of their clients and suppliers will bring welcome transparency.
But even here there are pitfalls. There is a danger that this, together with other incentives we create to invest in “green” firms, discourages “brown” firms from making the investment necessary to de-carbonise their operations.
As Yale University academic Kelly Shue has concluded, firms that are already green cannot become substantially “greener”, while increasing the cost of capital of brown firms, makes them less likely to invest in transition technologies.
While she is not arguing for a reversal of the global divestment of oil and gas, there is a recognition that the solution rests with companies investing in new technologies to reduce their environmental impact. If the cost to innovate increases, the ability to invest in innovation to tackle the world’s greatest environmental and social issues is undermined.
It also raises another concern. The compulsory carbon reporting regime will certainly provide a clearer picture of Australian company’s environmental performance but it also serves to highlight the fact that too often now the “social” in ESG is being neglected.
It is often said: “What gets measured matters”. It is easy to measure carbon emissions, it is not so easy to measure social impact.
All of this simply highlights the fact that often simplistic, conventional thinking is not enough to fix complex, wicked environment and social problems. We need to think differently.
The government’s recent commitment, as part of the federal budget, to convene an investor roundtable to discuss how to unlock private capital to support social impact investing initiatives, plus $11.6 million in funding for a Social Enterprise Development Initiative are great steps in the right direction. But much more needs to be done.
Save the Children’s first fund was a proof of concept, we have now launched a second, larger fund. A handful of other leading charities and some of the world’s most progressive philanthropic foundations are now adopting similar strategies; using “blended finance” mechanisms, guarantees and first loss capital to encourage private sector investment into initiatives that help us achieve sustainable development goals.
Right now, this investment is a drop in the ocean compared to what is required to tackle the need in our world. Yet, it is an approach that offers hope of creating deep impact and providing Australian companies, social investors and philanthropists an opportunity to make a real social impact as part of their broader ESG strategies.
- Paul Ronalds is Chief Executive of Save the Children Global Ventures.
