Q: You currently work for The Difference Incubator (Tdi). Can you please tell me more about what Tdi does and why you get out of bed and go to work every day?
TDi was founded by investors and entrepreneurs to awaken the possibility of doing good and making money. We fundamentally believe that it is possible to design businesses that deliver both financial and social value, without compromising on either.
Personally, this is very motivating for me. If we are to reshape how capital flows and how our economy works, we must start by re-naming what is possible – and then get to work.
I am also really motivated by the business owners I get to work with. They are passionate about helping their community and prepared to take risks to change the status quo.
Q: Working at Tdi I’m sure takes you on some interesting adventures in the Pacific. Are you able to share with us some of the projects you have been working on in the Pacific Islands region?
In 2015 TDi began working in the South Pacific in partnership with the Department of Foreign Affairs and Trade to identify and grow social enterprise. During this time, we met with over 80 businesses and worked with several enterprises in depth to prepare them to be ready for investment, taking them through our investment readiness process.
After working intensively with two businesses, we successfully facilitated two impact investments – one into a coffee company in Vanuatu and the other into a coconut oil business in Samoa. These two businesses received investment from the Genesis Impact Fund, a $5 million impact fund, established by our sister company, Benefit Capital specifically for South Pacific business.
We are also currently working with several businesses in Vanuatu, Samoa and Fiji. We expect to announce several more impact investments in 2018.
Q: The ‘hallmark’ of impact investing is the ‘social impact’. Can you please explain to us how Tdi measures ‘social impact’?
At TDi we judge businesses by the quality of the change they create in the world. Yes, they need to deliver risk-adjusted market rate returns, but unlike traditional investing, they must also deliver measurable social and/or environmental outcomes.
So, what measurement approaches do we use to assess social impact? The answer is: it depends. It depends on what investors require, what the business wants and what beneficiaries want. It also depends on the nature of the social change targeted by the business.
At TDi we work with enterprises to first deeply understanding their mission. Then we help them map their Logic Model – how and why they create change in the world. Only then can we identify what we should measure and how that information could be collected. Often we recommend a mix of qualitative information, such as stories and case studies, and quantitative information, which helps to provide a holistic picture of the change created, and where improvements can be made.
Another way of measuring ‘social impact’ is Social Return on Investment (SROI), however we do not typically recommend SROI. SROI calculates the long term expected benefits of a particular intervention to society, expressed as a ‘return on investment’. For example, an education program might deliver $6 in societal benefits for every $1 invested in the program. SROI can be helpful for making internal comparisons between programs, but because SROIs are based on a complex set of assumptions, it is usually difficult to compare across organisations. In our experience, SROI’s also require quite a lot of work relative to the learning outcomes generated.
Q: After an organisation has undertaken its ‘social impact’ assessment, are there on-going monitoring and reporting requirements?
Yes. For example, Tanna Coffee, who went through our Investment Readiness process and received investment from the Genesis Impact Fund, has completed a survey with over 300 farmers and conducted ten in depth case study interviews. They will repeat the survey and the interviews each year to understand if the investment is leading to increased income and wellbeing for farmers. Outcomes are typically reported on to the Genesis Impact Fund every 12 months.
Q: Do you have any tips you are able to offer Pacific businesses about how to get ‘impact investment ready’?
At TDi we look for four key areas to assess if a business is investable:
Mission – Does the organisations have a central social or environmental mission at its core? It must be able to answer: how is this enterprise working to make the world a better place?
Model – The business model needs to be more than simply sustainable; it needs to be commercially viable in order to repay the investment capital it takes on.
Management – At the core of any Investable Social Enterprise there needs to be a sound management team who have the skill set and capacity to deliver both the business model and the social or environmental impact they have committed to.
Measurement – The ability to measure whether they are achieving their social and/or environmental outcomes.
Q: It would be remiss of me to not ask you this as part of our Pacific Personalities interview segment – what is your favourite restaurant in the Pacific?
It doesn’t get much better than lobster at Little Paradise Restaurant in Port Orly, Santo.