Prince Charles to Unveil $100 Million Fund for Women Empowerment

(Bloomberg) -- Britain’s Prince of Wales is not who you’d expect financial-market innovation to come from. But an effort to empower women in South Asia using elements of venture-capital funding and options contracts is shaping up under his patronage.

Prince Charles, 70, unveiled on Tuesday a $100 million fund that will channel bond investors’ money to give half a million women and girls access to better education, jobs and entrepreneurial opportunities over the next five years. The expected return is twofold: a percentage gain and the return of principal, plus the fulfillment of the investors’ own corporate-social-responsibility targets.

“Globally, a growing number of investors are no longer driven by financial return alone,” said Richard Hawkes, the chief executive of British Asian Trust, which the prince founded in 2007. “There’s increasing recognition of a blended return -- both financial and social.”

Social Goals

A key element of the project is the idea of a development-impact bond, which pays a coupon if, and only if, the pre-agreed social goals of the investment are met.

  • British Asian Trust practically acts as the investment banker for the project, helping to raise capital, and as the project manager, bringing together the various stakeholders on a common forum to implement the project
  • Two sets of investors take part in the bond:
    • The “risk investor” buys the bond upfront, bankrolling the project; this investor takes risks somewhat similar to a venture capitalist in that they may or may not get a return; in fact, they may lose all their money
    • The “donor” pays off the first group, with both principal and interest, if annual goals are met; in essence, they write a sort of option, agreeing to buy out the bonds if a condition is met

Announcing the initiative, Prince Charles called it the BAT’s “most ambitious venture to date.”

“The sustainable development goals endorsed by 193 member states at the United Nations cannot be achieved unless radical new approaches are developed,” he said. “I am very proud that the British Asian Trust is at the forefront of developing such innovations.”

UBS Partnership

He alluded to a similar project already under way in India.

UBS Group AG’s philanthropy unit, UBS Optimus, is an early player in social financing. It has already partnered with the BAT for an $11 million development-impact bond that works to improve children’s education in India. The project, targeting 300,000 kids, went on stream in September 2018 in Gujarat, Indian Prime Minister Narendra Modi’s home state, and Delhi.

“The benefits of a DIB model are twofold,” Maya Ziswiler, the head of social finance at UBS Optimus Foundation, wrote in an email. “It not only brings in new private-sector capital, but also increases transparency and accountability in how development money is being used. This incentivises organizations to deliver on actual social outcomes, instead of paying for activities.”

Donor Consortium

While UBS Optimus is bringing in the initial investment for the Indian project, assuming the execution risk, a consortium including the BAT, Michael & Susan Dell Foundation, Tata Trusts, Mittal Foundation, British Telecom and Comic Relief have signed up to make the final payments upon successful completion of the project.

The bonds carry a 6 percent rate of return, half of which will go to UBS Optimus and the other half to the three delivery partners in India. UBS recycles all its gains into social projects, according to BAT.

The U.K.’s Department for International Development, in addition to offering its expertise, also funds program management, legal matters and project evaluation.

Funding Dilemma

Hawkes said the DIB model, while enabling financial investors to take part in social projects, can also resolve the typical dilemmas of a big donor like the U.K. government. While the traditional model of international aid is based on activities -- a sum of money paid to do something -- the DIB model is based on results

  • This reduces the potential for wasteful spending or corruption
  • Since a donor won’t pay upfront, public money is not under risk

The BAT will seek funding for new the $100 million project from the charity units of big banks for the initial risk investment and national governments and other big donors for underwriting the final payment.

“This is an outcomes-based fund,” said Hawkes. “The ambition is to raise those funds and scale up our work, learning from the work we have already done.”

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