The Lord Mayor’s Charitable Foundation (LMCF)
The Lord Mayor’s Charitable Foundation (LMCF) is a leading philanthropic organisation and the largest community foundation in Australia. With a long and impressive history supporting the community through philanthropy, the LMCF has recently started to make impact investments from its corpus, including investing in the digital Hireup and launching an Affordable Housing Fund. We speak with CEO Catherine Brown to learn more.
What attracted the LMCF to engage in impact investing and how does it complement your grant making?
We were inspired by what we had seen other Foundations achieve, such as the Skoll Foundation, and more recently the Rockefeller Brothers Fund – and others. Our social impact investment policy aligns with our grants Impact Areas, such as increasing the supply of affordable housing, food security and social cohesion.
Earlier in 2016, the LMCF announced a unique collaboration with Social Enterprise Finance Australia (SEFA) to support the development of affordable housing in Victoria. Can you tell us a little about this Fund and why you created it?
We created the Affordable Housing Loan Fund with SEFA to provide another source of funding in addition to grants for not for profits undertaking affordable housing that would assist low income families and individuals. We have since allocated $3 million to this Fund and $1.3 million has been drawn down to date by Habitat for Humanity.
Volume wise, investments in social enterprises are currently dominating the impact investment market. Do you see this broadening or changing over time, and how?
I think there is also potential to make more impact investments in affordable housing at a larger scale as is done in the UK and the US. The impact investments might be part of a layered investment approach, which could include a grant and commercial development funding. We are researching these models further at the moment.
The LMCF has a strong focus on fostering innovation to drive social change. What relationship do you see between impact investing and social innovation?
A social innovation is a novel solution to a social problem that is more effective, efficient, sustainable, or just than present solutions… (Centre for Social Innovation, Graduate School of Business, Stanford University).
A social innovation could be funded via a grant to a not for profit or via an impact investment in a social purpose for profit company.
Impact investment can be very helpful to test and scale an innovative solution to a social problem. The social innovation could be a product or a process. Our investments in Hire Up and in Yume both have potential to make a major impact on the challenges of empowering people with disabilities and reducing food waste respectively.
What have been some of impediments to engaging in impact investing, and have you managed to overcome these?
We have taken some years to learn about impact investment. We invited the Skoll Foundation to Australia to help us learn more. This was very helpful. We have attended fora and briefings from other visiting foundations and Impact Investment Australia. It is not enough for management to be involved, impact investment must involve the Investment Committee and the Board.
My biggest challenge has been convincing the Investment Committee that we should be receiving a financial return as well as making a social or environmental impact! An impact investment is not a grant. Adding impact investment into the strategic asset allocation means that a different source of funding (capital) can be unlocked to help achieve a social or environmental purpose.
What’s your vision for the role that impact investing will play in the future of the LMCF?
My personal goal is that we increase our impact investing allocation to 5% over the next few years so that we can be part of demonstrating one or more solutions to the affordable housing challenge that can be scaled and replicated. This increase will depend on Board support. It will also depend on the right projects emerging and us continuing to develop the right collaborations with community housing organisations and effective funding partnerships.
I expect that we will continue to invest in social enterprises that align with our priority impact areas.