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Nesta and (Social)Impact Investing
Presentation 26 November 2012
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• 14 year history of backing innovation in the UK
• research, programmes, investment, skills
• £300m endowment• registered charity, innovation for public
benefit
© Nesta Investment Management | Nesta Investment Management LLP is authorised and regulated by the Financial Services Authority
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”
Source: Office for Budget Responsibility, 2011
Economically and culturally: we cannot afford business as usualPublic expenditure needs to rapidly reduce
But complex problems will be a drag on the public sector and the economy as a whole anyway
Source: UK Budget, 2012
CONFIDENTIAL - NOT FOR DISTRIBUTION
State
Citizen
SocialSector
PrivateEnterprise
© Nesta Investment Management | Nesta Investment Management LLP is authorised and regulated by the Financial Services Authority
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
Our work in impact investment
CONFIDENTIAL - NOT FOR DISTRIBUTION 11/04/2023 Page 8
PrivateEnterprise
SocialSector
State
Citizen
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
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Feast or famine? Either way, not a balanced diet
Seeing the impact in impact investing
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.
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.
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Output: a measurable unit of a product or a defined episode of service delivery directly produced by an investee’s activities.
Outcome: an observable, and measurable, change for an individual or organisation.
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Negative Neutral PositiveImpact Potential
Standards of Evidence for Impact Investm
ent
Low Im
pact Risk H
igh
Investing in what works….
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We invest in innovations
NII1 creates Public Benefit through its investment by:• Delivering impact• Reducing impact
risk• And growing output
(not shown here)
We won’t invest here
Some investments will underperform
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
Target impact sectors Ageing well 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
Nesta Impact Investments: Investing for Public Benefit in the UK
Outcome-focused Inclusive Affordable Accessible Sustainable
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• 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.
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
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© Nesta Investment Management | Nesta Investment Management LLP is authorised and regulated by the Financial Services Authority
More information
www.nestainvestments.org.uk
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