- Venture philanthropy is a growing segment within the social impact space
- Sometime called ‘philanthropy on steroids’, it aims to maximise social impact
- Stockhead talks to AVPN (Asia Venture Philanthropy Network), the biggest social impact network in Asia
Investors are well familiar with ESG funds, a raging hot sector that’s been pouring billions into public markets every year in the name of climate change and social justice.
At last count, total assets under management was US$37 trillion, and by 2025, it’s predicted to grow even further and hit US$53 trillion.
But with persistent problems of greenwashing continuing to taint the sector, whether or not these funds actually create any meaningful impact has become a matter of great debate.
According to the UN however, one sector that will undoubtedly play an increasingly prominent role in supporting its sustainable development agenda is philanthropy.
Philanthropy often refers to a form of altruism done out of a selfless desire to promote the welfare of others. ESG investing on the other hand, may have the same goals but it tends to lean more heavily toward a bottom-line dollar focus.
Philanthropy in its purest form has evolved over the decades but more recently, a subset has emerged in the form of venture philanthropy.
‘Philanthropy on steroids’
Like traditional philanthropy, venture philanthropy also seeks to make measurable and positive change in the world.
But similar to venture capital, venture philanthropy is more characterised by a high degree of investor oversight and engagement that aims to maximise outcome.
Naina Batra, CEO of the biggest venture philanthropy network in Asia, AVPN, told Stockhead that venture philanthropy was born out of the huge success of the early venture capitals in the US.
“The first VCs made a lot of money in the US by being the first funders of a startup, mentoring them and making unicorns out of them. They then wanted to bring that VC business model to philanthropy, and that’s how it became to be known as venture philanthropy,” explained Batra.
Under Batra’s helm, AVPN or Asian Venture Philanthropic Network has now become the biggest network and ecosystem builder in Asia that works to increase the flow of capital towards impact in the continent.
At the core of AVPN’s model is what it calls the ‘continuum of capital’, a system where funders within the network may combine grants, debts and equity across multiple projects to achieve deeper impact.
“Venture philanthropy works a lot like venture capital. It looks at multi-year commitments. It doesn’t necessarily just fund the idea, it looks at who the founders are,” said Batra.
“We ask questions like what’s your strategy? Do you need help on financial planning? Do you need help on technology? Can I help you with HR?
“So it’s going over and above the cheque book, and that’s basically what venture philanthropy is,” Batra added.
Some say that venture philanthropy is “philanthropy on steroids”, and while Batra admits that profit is a focus, it’s not necessarily confined to dollars and cents.
“It’s not like impact investing where you’re looking for financial return. In venture philanthropy, you’re looking for a social return that you can measure.
“For example, we’re not just funding a school. We’re looking at metrics such as how many children have you enrolled to the school since we last gave you the grant. So it’s a continuous measure of regular milestones,” said Batra.
All about passion
So what exactly do venture philanthropists look to get out of it?
“I think what they hope to get out of it is to produce a unicorn in the non-profit space,” says Batra.
“They hope to help create organisations that could scale fast, and therefore address some of the bigger and more complex problems.
“So instead of looking at 100 school kids, they want to see 1000 kids, and then a 10,000 kids and so on,” added Batra.
En Lee, Head of Sustainable and Impact Investments in Asia at LGT Group, a funder at AVPN, believes that most organisations and individuals who join AVPN are driven by passion.
“Many of them have had very illustrious careers in a previous life, and now they’re trying to look for purpose and meaning, and philanthropy is an expression of that,” he told Stockhead.
Lee said the disconnection he felt between his own personal and professional values during the 2009 financial crisis was what led him to pursue a career in this field.
“What really upsets me is that poverty is a multi-multifaceted beast,” he said.
“If you don’t have energy, chances are you don’t have proper healthcare. If you don’t have proper healthcare, you’re not getting access to education. If you don’t have access to all those three, how can you get financial inclusion?”
Asia Pacific is a booming region for philanthropy
Asked how venture philanthropy differs to ESG, Lee explained that ESG is not an investment strategy, but rather a framework that can be applied across different approaches and projects in any organisation.
It’s there to provide the lamp posts to understand where the potential fires are, instead of the toolkits to mitigate those fires.
What’s important in sustainable investing he says, is to encompass the strategies that go from A, B, and C.
“A is Avoid the harm, meaning let’s come out of the sin industry like tobacco, coal and pornography,” Lee explained.
“B means that it’s not enough to avoid the harm, let’s ensure we’re Benefitting the stakeholders. And the way to look at B is to incorporate the ESG framework into that.
“While C means that it’s not enough to avoid the harm and benefit stakeholders, we also want to Contribute to solutions,” Lee said.
Lee believes the Asia Pacific region presents a great opportunity for venture philanthropy, as it accounts for some 42% of all global wealth.
Dini Indrawati, country director for AVPN in Indonesia, agrees and says that members of AVPN in Indonesia have grown from nine just three years ago, to 50 today.
Indrawati explained that AVPN’s success has been partly due to the fact that it’s been able to curate and categorise members into their respective expertise.
“We categorise our members based on their capacity to give support either financially or non-financially,” Indrawati told Stockhead.
“For example, with startups and social impact organisations, they’re not categorised as members, but we help them get visibility on our platform.
“Because of that, we’re able to bring various stakeholders from the private sector, governments, venture capitals, incubators, and academia like universities.
“Basically we’re bringing any stakeholder across the world who has a mission to bring more capital towards impact in the Asia Pacific region,” she said.
AVPN will be part of the side event program at November’s G20 world leaders meeting in Bali.