Real change through ‘Vital Impact Investment’

Photo: The Waikato Story.

Full Momentum Waikato Annual Report 2020 in PDF.

Momentum Waikato was established to bring about positive social and environmental change, by being nimble and doing things that fall outside the remit or ability of the region’s traditional funding agencies.

Like it says on the label, we are here to build ‘A Better Waikato for Everyone, Forever’ – and we now see ‘impact investment’ as central to how we are going to achieve it.

Our strategic Purpose is ‘Transformational, Intergenerational, Strategic Outcomes’ (‘TISO’), which makes us a bit different from most other community foundations, especially in Aotearoa-New Zealand.

The core mission of all community foundations, including Momentum, is to build an endowment fund for a geographical area by investing donations and gifts-in-wills, with the resulting income being both distributed for positive social and environmental outcomes and re-invested to continue the cycle.

A big part of our service is therefore making grants to what our donors themselves want to support. A Deed of Gift with Momentum is the smart way to ensure that your capital continues to enable the local cause or entity you care about long after you are gone.

For many community foundations this is the ‘sum total’ of what they’re doing, growing and disbursing donated and bequeathed funds as they’ve been directed, which is valuable and often essential support for effective charities and much-loved community groups and institutions.

However, much of the very worthy work done by these organisations is simply delivering or supplementing a needed service beyond what the state or market can or will provide, and not necessarily to solve societal problems or otherwise make positive change. Such ‘BAU’ needs to happen, but it doesn’t ‘shift the dial’ on the indicators pointing in the wrong direction in our nation.

Momentum Waikato was set up by the WEL Energy Trust with a 70-year loan that forms the core of the endowment in our care, with its investment income partially serving to meet our operational costs.

As important, this capital and some of our donated funds are ‘untagged’, in that the income is not tied to any donor directives, which means we can use it to achieve those ‘Transformational, Intergenerational, Strategic Outcomes’. This is why Momentum does the ‘Vital Signs’ research project, so the wider community has the opportunity to guide our funding priorities.

The first Waikato Vital Signs outing in 2016 informed the following ‘Vital Impact’ grant round, which offered larger sums than had been traditionally available to social enterprises and community groups.

In the years since however it has become clear to us that simply giving out grants is a limited one-dimensional approach for getting the best outcomes from the endowment’s income, one that limits the options for both us and the frontline organisations we’re looking to enable.   

Consequently, Momentum has now diversified how it funds the change needed to create truly inclusive prosperity in our communities and real progress in rescuing our environment.

Central to our new thinking is a move to an ‘impact investment’ model – as in investment that seeks both a financial AND a social or environmental return. To us, it makes sense to use our own capital to directly drive our mission, rather than only growing the endowment in a separate silo.

We’re calling this our ‘Vital Impact Investment’ program.

What is meant by ‘impact investment’? The following is from the Growing Impact in New Zealand report produced by Ākina with contributions from JB Were and EY Australia.

Impact investments are investments made into companies, organisations, and funds with the intention to generate social and environmental impact alongside a financial return.

Impact investments can be made in both emerging and developed markets and target a range of returns from below market to market rate, depending on investors’ strategic goals or mission.

The growing impact investment market provides capital to address the world’s most pressing challenges in sectors such as sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services including housing, healthcare, and education.

If you’re familiar with Waikato Vital Signs, you will see the resonance. And then…

The importance of intentionality: What differentiates an impact investment from any other kind of investment is that it is achieving an outcome that would not exist if the impact investment was not there or the market will not provide for it.

Read more of the Growing Impact in New Zealand report.

Waikato Vital Signs continues to define and contextualise our priorities. But unlike the ‘grant round’ model, we are now no longer sending money out the door and then just waiting for perfunctory form-filling reports.

We are instead seeking to actively partner with changemakers, social enterprises and community leadership organisations to deliver financially and socially measurable returns, whether its via projects or ongoing relationships. This could be in the form of start-up capital, equity stakes, underwrites, low interest loans or, still in some cases, grants.              

If a community group or a social enterprise is looking for capital to achieve change, they can pitch to us for an ‘impact investment’ partnership at any time. Regardless of the financial mechanism, we will actively work with those we enable to realise our shared goals.

Our Vital Impact Investment program is a radical departure from how the community sector has traditionally been funded in the Waikato and we are excited by its potential to realise the transformational goals that lie at the heart of our purpose. We are in this for the long haul, please do join us in creating ‘A Better Waikato for Everyone, Forever’.