Our 24-hour number +44 (0) 208 0641 829

Tom Hall: It’s possible to financially incentivise social impact

In May’s edition of The Lede, we sat down with Tom Hall, Head of UBS’s Global Philanthropy Services, to talk about how to maximise the impact of philanthropic giving.

people planting trees

This month’s comment comes from Tom Hall. Tom Hall leads UBS’s Global Philanthropy Services, helping clients identify and achieve their philanthropic strategies and maximise their impact.

So many of our clients are passionate about philanthropy and want to use their wealth to address the pressing social and environmental problems the world is facing. They want their philanthropic giving to result in big changes that reduce poverty, promote prosperity and protect the planet. To achieve that, philanthropy has to be focused on finding the most impactful philanthropic programmes that have the potential for scale.

What we’ve learned is that it isn’t just the success of philanthropic programmes that matter, but also the effectiveness of the spending. How can philanthropists spend better? And how can we get others to join us?

It’s all about impact

Funding for philanthropic programmes should have a positive impact. Sadly, not all philanthropy clears this basic hurdle. That’s because a lot of charitable funding focuses on activities rather than results. So, first and foremost, all philanthropic giving needs to be tied to real outcomes. Philanthropists need to base their giving on evidence of impact — from first funding decision to conclusion.

It’s also critical to look for impact through scalability. Scaling across contexts means that impact per donation can increase with each iteration. Once a concept has proven itself in one location, bringing the same intervention to another location is often faster, easier and cheaper.

Multiplying impact with social finance

The way philanthropists fund matters: it’s possible to financially incentivise social impact. That’s why UBS Optimus Foundation is active in developing, piloting and applying social finance instruments like equity investments, impact loans and impact contracts. We’ve seen the benefits of results-based funding in our use of impact contracts — sometimes called Development Impacts Bonds (DIBs).

UBS Optimus Foundation was the first to use such an instrument in education with the Educate Girls’ DIB, providing upfront funding as working capital for Indian NGO Educate Girls. After an independent evaluator confirmed achievement of hundreds of girls enrolled in school alongside improved learning, the Children’s Investment Fund Foundation (CIFF) payed a bonus payment to Educate Girls and an outcome payment to UBS Optimus Foundation: recouped costs and a return. These funds can then be recycled into other impactful philanthropic programmes.

So, how can we use this tool to have more impact? What we’re focusing on now is funding at scale. The Quality Education India DIB, launched with partners in 2018, builds on the successes and lessons learned of the Educate Girls DIB to scale up and reach 200,000 children across several Indian states — results so far show that these children are learning twice as fast as those in control schools. 

If this performance continues the original $4 million of working philanthropic capital “invested” by our clients is due to be repaid next year, along with a “return” of eight percent — all of which can be recycled into further philanthropy.

Crowding in private capital

But even if we’re totally focused on impact and scalability, the world’s most pressing problems can’t be solved with the current philanthropic capital in play. The UN estimates the annual funding gap to achieve the SDGs by 2030 to be USD 2.5 trillion.

Critically, then, we see social finance instruments as a way to leverage the power of philanthropy to attract private capital. Our DIB Fund will use blended finance — philanthropic and commercial capital — to invest 100 million US dollars to improve healthcare, education and livelihoods globally through 15 to 20 results-based contracts. 

By investing in a portfolio of impact contracts under one umbrella, we can improve cost efficiencies and diversify risk. The first 20 percent will be philanthropic capital that — by taking the first risk of loss — will unlock the remaining commercial funding by making it much less risky to invest in areas that commercial investors otherwise couldn’t, getting the philanthropist five times the impact.

A bold opportunity for making progress

We think social finance holds great promise for driving sustainable and scalable change. We know philanthropists are interested in seeing their contributions positively impact the world’s most vulnerable. And we think social finance vehicles will be of great interest to commercial investors as well. Most importantly, we can make faster strides improving the lives of the underprivileged.

About Tom Hall

Tom Hall leads UBS’s Global Philanthropy Services, helping clients identify and achieve their philanthropic strategies and maximise their impact.

About The Lede

This article was originally published in The Lede, Transmission Private’s monthly newsletter that tracks the future of reputation management. Featuring interviews with leading private client advisers from the worlds of law, finance, and accountancy, sign up today to receive the newsletter in your inbox every month.

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

Sign up to The Lede

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.