Philanthropic Investments That Earn Top Marks

Innovative solutions such as blended finance and outcome-based funding allow philanthropists to achieve global impact.

Around the world, more than half a billion children cannot read and write at the right level for their age. No amount of government spending is likely to change that in the short term. But smart philanthropic capital and new, affordable education technology are showing what can be achieved rapidly, and at scale. The United Nations’ ambition to attain “inclusive and equitable quality education for all” by 2030—one of its 17 Sustainable Development Goals—may yet be within reach.

“Impact philanthropy is focused on evidence and results,” says Maya Ziswiler, CEO of the UBS Optimus Foundation, which oversees 350 grants in 20 countries. “In the field of education, it’s about delivering learning outcomes that can be measured, replicated and scaled-up for millions of students.”

One new approach for achieving impact at scale is through blended finance initiatives^*. Here, impact philanthropists agree to fund the up-front costs of SDG-aligned programs in order to unlock additional private capital. The sponsors—for example, a government, in the case of education and health initiatives—commit to repaying this capital only if certain social and/or environmental outcomes are achieved. The philanthropic capital takes the first hit if outcomes are not met, effectively de-risking the investment for other investors.

The UBS Optimus Foundation recently launched a pioneering $100 million blended finance initiative linked to SDG outcomes, funded by donations from more than 30 UBS clients. Initially, the fund will support educational programs in Sierra Leone and Ghana, and a recycling social enterprise in Nigeria.

The foundation also launched three UBS Collectives in 2021¹ for clients who wished to combine their expertise, interests and capital to address issues such as child protection, climate change, and health and education.

The UBS Accelerate Collective, for example, explores new methods of financing that will improve the health and education of children in vulnerable communities in Africa and Asia.

Successful trial in India

One innovative program piloted by UBS in the Indian state of Karnataka² used outcome-based funding, where the return on investment is directly tied to the achievement of measurable learning targets.

The pilot aimed to test both the effectiveness of a tablet-based educational program and an adaptive financing mechanism that raises more funds the more children learn. Some 200 children received tablets with an educational program developed by Chimple, a free mobile app, while a control group received none. Baseline tests were conducted on both groups at the start of the project and their learning progress was recorded over a 12-month period.

The adaptive financing mechanism revolves around a central treasury that holds all the funds but is not controlled by a central party. The treasury issues tokens for the funds received and holds the outcome payment until the project’s end. Early investors are offered tokens at a fixed price, but as the project advances, more investors can join in at a price that reflects the likelihood of the project’s success. This is calculated using data linked to the children’s learning progress. At the end of the pilot, those with tablets had learning outcomes that were 28% higher than the control group, amply meeting the pilot’s learning targets. This program was a win-win for the children and for the project’s financial backers and has led to demand from other regions in India.

UBS believes technology will continue to help make outcome-based funding as easy to access as any other digital investments, unlocking impact at scale and bringing the UN SDGs closer to fruition.

Scaling impact in Africa

Malawi, a landlocked African nation with a GDP per capita of less than $700 a year, will shortly become the first developing nation to make edtech platforms available to every child in primary school—a total of 3.5 million. At present, only 10% of children in Malawi can read adequately by the age of 10 and only one-third of schoolchildren complete their primary education.³

The Ministry of Education’s new tablet-based learning program grew out of the work of Imagine Worldwide, an edtech NGO founded by Joe Wolf and Susan Colby.⁴ The results of their educational platform, used by 150,000 children in Malawi, convinced the Ministry of Education to fund and roll out the program nationwide. Wolf and Colby, who have been named UBS Global Visionaries⁵ for their outstanding work in finding innovative solutions to social issues, are also using their program to improve learning outcomes in Liberia and Ghana, and plan to extend it into Sierra Leone.

“This is a massively scalable solution with a very deep and robust evidence base behind it that is cost-affordable and that can work sustainably within government systems in the long term,” says Wolf. “UBS Optimus Foundation has used its platform to promote our work, secure grants and operational resources, and has linked us up with other experts in the field that have ended up being our partners.”

Sources

* Your capital is at risk. The value of an investment may fall as well as rise and you may not get back the original amount.

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Using Wealth for Impact

Philanthropic Investments That Earn Top Marks