Beyond Compliance 2024

Beyond Compliance: Embedding Impact through Innovative Finance18OBF supports the inclusion of underrepresented groups in workforces and leadership of both companies and their supply chains. There is significant direct finance institution (DFI) activity supporting gender-linked blended finance, and whilst gender KPIs are the most commonly used social metrics in sustainability-linked bonds, there is anticipation that the gender climate nexus will feature prominently in impact-linked finance going forward.47 For example, IDB Invest provided a $64 million loan and $130,000 in technical assistance to Grupo Elcatex, a major Honduran textile manufacturer, in 2020. The seven-year loan included a performance-based incentive through the Women Entrepreneurs Initiative (We-Fi), offering up to $210,000 for increasing women-led or owned SME participation and percentage purchases in their supply chain. Early results show that Elcatex has hit the first target, but – more importantly – the programme has catalysed significant organizational changes, including establishing a gender division, implementing a women-led audit programme, and creating a gender committee.48CASE STUDY 7 IDB Invest and Elcatex – workforce inclusion 2.5 Innovative corporate philanthropy Corporate foundations are using OBF to scale the impact of their philanthropy and align with government and the social sector around shared goals. Aside from participating as investors and outcomes funders in the existing OBF market opportunities, corporate foundations are thinking creatively about how to incubate programmes that can be scaled through core business operations or supply chains. Companies are using CSR budgets alongside ESG and operational budgets to support social impact in line with core business objectives. For instance, companies have been reasonably active in the impact bond market, where 25 commercial banks and 10 corporate foundations have participated as either investor or outcomes payor. Companies have used these outcomes partnerships with governments and NGOs to build quasi-markets for social outcomes such as digital skills. OBF can be used to integrate philanthropic funding within commercial financing structures. For example, the Wildlife Conservation Bond is one of a suite of outcome bonds issued by the World Bank.49 Proceeds are used to finance the bank’s sustainable development projects, and so the principal is protected. The coupon payments, funded by the Global Environment Facility, are linked to successful outcomes, which in this case is the preservation of black rhinos. In other bonds the interest rate has been tied to the generation of carbon or plastic credits. There are commercial banks actively exploring the use of this structure in other sectors. As a client-facing foundation, UBS Optimus Foundation (UBS OF) leverages its position to offer advisory services to high-net-worth individuals and corporations engaged in philanthropy. Building on successes like the Educate Girls Development Impact Bond, UBS OF has launched two major initiatives. Firstly, the Outcomes Accelerator , with UK and Swiss government as partners, will accelerate more effective testing, scaling and mainstreaming of OBF approaches. Secondly, the SDG Outcomes Initiative, a $100 million blended finance fund partnering with Bridges Outcomes Partnerships to invest in SDG-aligned outcomes in developing countries.50 The foundation is working to integrate impact into corporate decision-making beyond traditional philanthropy, collaborating across UBS divisions, including wealth management and asset management. To facilitate this, UBS has developed a rating tool that assesses the foundation’s programmes based on intentionality, additionality and measurability, with the aim of expanding this to support UBS teams in aligning impact with existing portfolios.CASE STUDY 8 UBS Optimus Foundation – building OBF markets