Nesta Impact Investments Cross the Start Line

In the UK, Nesta Impact Investments has set up a £25m (AU$39m) fund to invest in social ventures with innovative services that are address some of the country’s most pressing challenges.

“The fund will invest in organisations that can have a material impact on supporting an ageing population; the attainment, employability and wellbeing of children and young people; and the social and environmental sustainability of communities,” according to Nesta’s Investment Manager Alex Hook.

“We have embarked on an eight-year journey to find and invest in the most promising social ventures which will have a tangible effect on the positive social outcomes we have set for our impact fund, Nesta Impact Investments, while also delivering a financial return.

“Examples of the types of opportunities include collaborative consumption models, group buying initiatives, crowdfunding platforms, community participation and ownership models, domestic or community generation projects, micro-agriculture systems – and more that I am yet to discover,” he said in a UK interview this week.

“These are long-term, complex issues that are accentuated by reductions in public spending and increasing need, creating a fertile ground for innovation and new approaches to the delivery of products and services.

“We are looking for organisations that have high potential social impact that can be evidenced, and a financially viable business model capable of producing a return on our investment,” the Impact Investment Director at Nesta Joe Ludlow said in his latest blog.

“In the first closing, we’re delighted that Omidyar Network, Big Society Capital and Nesta have committed £17.6m to get things underway.

“Already we’re seeing some exciting innovations with the potential for really significant impact, in fields such as telehealth for older people with long term conditions, adaptive learning technology for school children, or aggregation of demand for electricity to get lower fuel costs for people on low incomes.

“The first thing that’s clear is that there are great ventures out there pursuing social impact through their products and services who don’t define themselves by their legal model (private company, charity, social enterprise) but by rather focus on how they deliver value and impact to their users and customers.

“The fund has some specific social outcomes it is seeking to improve, but we don’t assume any one sector (public, private or social) or any legal structure is particularly better at achieving these.

“The second thing we excited about is the role that technology is playing in the innovation that we’re seeing – speeding up services, enabling better access, and creating more sustainable business models. Telehealth solutions help medics to have easier communication with, and monitoring of, older people in the patient’s home, improving their quality of life and reducing the NHS’ costs. Adaptive learning technologies use artificial intelligence to bring the benefits of really high quality personal tutoring at very low cost and so within reach of families on middle and low incomes.

“The third thing that’s clear is that our focus on the standard of evidence that an innovation can provide is going to be crucial in helping to direct capital to innovations that really have an impact. Most of the ventures we’re speaking to are at a very early stage – they perhaps only have a prototype product and a theory as to why it will have an effect on one of our target outcomes. We can’t just scale up these innovations. We will be investing in further testing and evaluation to progress the standard of evidence for impact so that we can be certain we’re growing impactful social ventures.

“Nesta Impact Investments has crossed the start line – we’re open for business and really excited about meeting and working with some really inspiring entrepreneurs who want to achieve significant impact over the coming eight years of this new fund.

“There is clearly a gap in the market for early stage investment in social ventures and Nesta is extremely well placed to address this,” the CEO of Big Society Capital said.

Nesta has published the ‘Standards of Evidence for Impact Investing’ describing its approach to the use of evidence in assessing impact performance in Nesta Impact Investments. Download the report here.

Nesta Impact Investments is managed by Nesta Investment Management, a wholly owned subsidiary of Nesta which is authorised and regulated by the Financial Services Authority.

Impact investing via Social Impact Bonds (SIBs) and similar funds were initialed in the UK in 2011 and Australia has begun a trial of SIBs in NSW.