“Impact Investing seeks to generate social and environmental impacts in addition to financial returns.”
The KL Felicitas Foundation is deploying its capital and resources in creative ways to address major problems such as poverty, climate change and environmental destruction. By actively pursuing its impact investing strategy, the KL Felicitas Foundation is helping to prove that social enterprises, using the innate power and strength of consumer and capital markets, can create positive change in the world.
Fundamental to the Foundation’s impact investing strategy is the goal of preserving and growing its capital. It is our belief that by pursuing a disciplined impact investing strategy, financial returns will be sufficient to allow the Foundation to continue providing capital of this type in perpetuity.
Using terminology originally developed by the Monitor Institute in its seminal report on impact investing, the KL Felicitas Foundation pursues two broad investment types in its portfolio:
- Impact First investments seek to optimize social or environmental returns and may accept a range of financial returns, from simply principal to market-rate. Impact first investments can accept lower rates of financial return in order to seed new, higher-risk investments that can generate sizeable social or environmental returns.
- Financial First Investments seek to optimize financial returns that simultaneously yield some social or environmental good.
Impact First Investments at KL Felicitas include:
- The Foundation’s Program Related Investments (PRIs). PRIs offer low-interest financing, loan guarantees, lines of credit or equity investments; and
- Starting in late 2010, the Foundation began making Corpus Impact First Investments. CIFs are typically Program Related Investments that are made directly from the Foundation’s corpus (rather than from the annual payout).
Financial First Investments at KL Felicitas include:
- Thematic Investments, which provide financial support (typically grants or equity investments) to investees that have programming that is closely aligned to the mission of the Foundation.
- Sustainable Investments, typically equity investments into companies or funds that focus on sustainability, particularly in the environmental, economic and social dimensions.
- Responsible Investments. The least numerous in our portfolio, SCIs are typified by equity investments into funds whose proceeds/profits are subsequently invested into social programming.
The KL Felicitas Foundation provides grants alongside many of its impact investments in order to help build the capacity and strength of the recipient enterprise. Often, in the early stages of starting a social enterprise, a subsidy is required to help pay the cost of operations until breakeven or profitability is reached. In other instances, these high-potential social enterprises may need some technical assistance, such as more robust accounting systems, to perform to their full potential and attract additional investment. Grants from KL Felicitas can be single events, or may be part of a multi-year strategy to help social enterprises gain scale and increase social impact over time.