Tilia Impact Ventures – Annual Report 2018
For the first time, we have the pleasure to present the Annual Report of Tilia Impact Ventures, the first impact investing fund in the Czech Republic, to you. Tilia was founded last year by Silke Horáková, co-owner of Albatros Media publishing house, co-founder of two foundations and a well known philanthropist, and Petr Vítek, co-founder of the Impact Hub network in the Czech Republic. After ten years spent running the first social acceleration programs and developing the local market of social enterprises together, they decided the time had come to make the next step and introduce an investment vehicle to bridge the financing gap and bring systematic, patient and mission-aligned risk capital for social enterprises with sustainable and scalable business models to the maturing market.
Why impact investing?
Since the concept of ‘impact investing’ is new to our country, you may wonder, what does the term actually stand for? Impact investments, as defined by the Global Impact Investing Network (GIIN), are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.
The term itself dates back to 2007 when the Rockefeller Foundation first coined the term impact investing as part of an emerging conversation on how to use capital differently. The impact investing segment has been growing rapidly since then, and GIIN estimates the current size of the global impact investing market to be $502 billion (GIIN, 2019), which is more than double that of last year (and four times that of 2017).
One may suggest that impact investing has evolved from socially responsible investment, which is a well-defined framework for choosing investments based on environmental, social and governance (ESG) criteria, not new to investors. The difference today is that impact investors are far more intentional about having a positive impact, as opposed to merely avoiding the negative impacts.
Therefore, impact investors intentionally focus on investments that generate positive, and measurable, social or environmental impact, and a financial return on capital. Many of them use the context of Sustainable Development Goals (SDGs), launched by the United Nations in 2015, that include e.g. end of poverty, end of hunger, climate change, quality education, affordable and clean energy, reduced inequalities or responsible production and consumption. The SDGs framework helps to focus on what needs to be done in order to address the most pressing challenges faced by humanity today, and the seventeen Goals have become a guideline for key performance indicators for many investors.
Impact investing challenges the long-held views that social and environmental issues should be addressed only by philanthropic donations, and that market investments should focus exclusively on achieving financial returns, as it combines both the rigorous analytics of traditional investment and the heart of philanthropy.
For institutional and family foundations, it brings the opportunity to leverage significantly greater assets to advance their core social and/or environmental goals, while maintaining or growing their overall endowment. But philanthropic sources alone are not sufficient to address the challenges the world is facing today.
Private investors and investment managers start to think in terms of impact alongside risk and return as well. Key players in the market, including e.g. BlackRock, the world’s largest investment firm managing over $6,5 trillion of assets, and UBS, have committed to impact investing and urged others to take a long-term view and consider their societal responsibilities. As the key players in the market are finally taking action, it is only a matter of time when the new paradigm of risk-return-impact gets fully adopted in all investment decisions.
With Tilia, we decided to pilot the concept of impact investing in the Czech Republic, being also one of the pioneers in impact investing in the region of Central and Eastern Europe. Impact investments have a history of nearly twenty years in Western Europe and we want to show that creating value in investment via both financial performance and measurable social or environmental impact is possible in the Czech Republic as well.
Tilia is bringing systematic risk capital for social innovation and piloting new tailored forms of financing for the social sector. Tilia aims to support social enterprises, to offer them a very flexible financial (in the form of tailor-made tools ranging from flexible loans to equity investments) as well as non-financial assistance to scale up their societal impact, based on a sustainable business model. Tilia is an impact-first fund meaning that we put more emphasis on societal impact rather than on financial returns.
Tilia also leverages on the experience of professionals from the start-up, venture capital, and private equity investment sector, whom Tilia has as members of the investment committee, and connects them with the experts from the social sector. We are also proud that some of the most experienced European experts in impact investing belong to our Advisory Board. It is part of our mission to educate the market and to introduce investors to impact investing as a new asset class. Tilia thus brings together people from different backgrounds, developing both the social and the investment ecosystems.
We believe such an inclusive approach will lead to more sustainable social enterprises and as a consequence to correspondingly growing impact investors base, growing potential for blended financing and so to change the culture of investing to drive positive change.