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How Can Philanthropy Get Creative to Finance Systems Transformation?

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Athanasia Price

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This blog is based on the Shaping Innovation Futures Discovery Report co-authored by Alex Hannant, Professor Ingrid Burkett and Assistant Professor Joanne McNeill.

6 minutes read

The ocean and its resources are being depleted, polluted, and over-exploited. While many groups – from governments, philanthropy, development banks to NGOs – are working hard on the issue, there are still big gaps. Fishers and first-line businesses struggle to access resources and coordinate solutions.

Shaping Innovation Futures is an exploratory project seeking to understand how we might accelerate the necessary transformation to navigate the next 30 years, and realise better futures for people, places, and the planet. Beyond specific solutions, the project focused on the underpinning conditions that enable us to organise, create, and act systemically.

The recently released Discovery Report makes a case for greater investment in systems innovation and the functions that enable it.

Systemic challenges like healthy oceans, accessible and clean energy or inequality are complex and hyperconnected and require systemic responses. Investing in singular solutions won’t achieve the scale of change the world needs right now. Experimenting with flexible capital and systems finance is where philanthropy must direct its creativity next. 

The project brought together a cohort of systems-thinkers and doers to jointly explore pioneering systems initiatives to understand why and how such initiatives are developed, how they operate, how they evolve, what skills are needed for this work, what support lifts them, and what barriers they face.

One of the initiatives, Future of Fish, acts as an intermediary, building human centred solutions that transform coastal economies for the sustainable use of ocean resources. In Southeast Asia they’re working on a Blended Finance platform and Market Development for shrimp farmers to finance improvements, stay competitive, and stave off poverty.

Future of Fish works to bring together and help translate the needs and perspectives of people from the Sustainable Fishing Movement, from small and medium fisheries and local fishers to governments and many other stakeholders. Their aim is to engage and innovate with the communities, first-mile businesses, and workers who rely on the oceans for their livelihood. Together, they develop viable solutions, deploying resources to support initiatives that reverse the adverse effects on oceans. 

This goal takes time and trust to achieve. While it might seem obvious that people want to protect the oceans, and there are many organisations on board, local fishers are often – understandably – focused on getting by daily to support their families. Bridging this divide in the system is essential to make progress towards the systemic challenge.

Future of Fish brings structure and coordination to systems so that resources can flow. They build new mechanisms and services as needed to enable the system. They optimise the distribution of the resources necessary for transformation: capital, services, knowledge, and data. Funding these important activities is constant work.

Fit-for-purpose funding and financing

A consistent message from the initiatives explored during the project centred on the mismatch between conventional funding and financing mechanisms and the resourcing needs of systems initiatives and the various innovations and actions they seek to enable. 

To follow, we include anonymous commentaries that were heard through the project: “Impact investment products – and all financing available – are not flexible enough when trying to do genuinely collaborative work.”

The commentary continued: “fit-for-purpose funding flows are a challenge and ideally require tailored vehicles that don’t currently exist. The current arrangements are workarounds – dependent on some higher-capacity organisations acting as funnels and proxy allocators.” 

Here, we explore the funding and financing requirements of systems initiatives through two lenses: 1) what’s required to resource core organising infrastructures, and 2) how innovation and action can be resourced across the intervention context. 

We also explore many of these themes in greater detail in our paper on Design Foundations for Systems Capital.

Resourcing core organising infrastructures/platforms 

Systems initiatives require resources to undertake core organising, the work of providing enablers of innovation, and linking resulting activities and flows with the macro context. This work is intensive, difficult, and benefits from having long-term and stable funding. 

“There needs to be some degree of certainty around the viability of the core initiative. Otherwise, it’s hard to generate momentum when you present as precarious and are constantly in survival mode,” explained in the commentary.

Currently, regardless of the increasing interest in systems innovation, many of the initiatives are finding themselves having to conceal the real nature of their work from funders, “there are no funds to resource systems change, we’ve learned what the dirty words are (for funders) and systems and adaptive strategy are some of them.”

Also, “around the messiness, it’s like we have to hide it from our funders – they want it to sit in a neat framework and that’s what they’re funding – but it’s such messy work and that’s the reality.”

As a result, very few funders in Australia are willing to fund non-project and program activity – this is just a reflection of where current culture, practice, and patterns are.

There is a structural and fundamental lack of dedicated resourcing for this form of systems innovation. It is not a command and control approach to change, but a facilitative one.

For funders, this implies at least two things – to foster systems innovation, core organising infrastructures need resourcing. Also, the nature of activity that’s generated through these infrastructures can’t be easily predicted or controlled – requiring adaptive investment approaches.

Capitalising interconnected innovation and action

Beyond core infrastructures, the initiatives we spoke to raised the need for financial capital to be available for the innovations and activities generated across their intervention contexts. Some of these may be self-resourcing or resourced through match-making with existing funding sources and mechanisms. 

However, it is important, and often missing, that investments are made with visibility of, and sensitivity to, each other and how they relate to the system context. Doing this creates opportunities to catalyse spill-overs and multipliers between innovations and, critically, for interdependent activities to be phased and coordinated. 

One initiative suggested: “financing intermediaries aren’t doing aggregation – they’re still working with individual entities on specific deals and activities.” Another initiative said, “investors are often rigid in what and how they’ll fund. Fit-for-purpose investment vehicles need to be creatively tailored to and for context.” This includes blended finance approaches but it’s more than that too. 

Blended finance draws on different forms of capital to remove barriers to investment and create an appropriate financing structure for any given activity. In a systems investment portfolio, this needs to happen at the individual activity level and also at the portfolio level, recognising that some activities may need entirely concessional funding in order to enable or de-risk other entirely commercial ones. 

Financing this way will require learning and experimentation, particularly around how interconnected and distributed value flows can be mapped, accounted for, and returned to capital sources/holders. 

In summary, this exploration shows, systems innovation and initiatives are currently being held back by fractured and insufficient access to financial capital. This is an area for high-potential intervention that funders will hopefully pick up, learn into, and share how their approaches are working.

References

A. Environmental Stewardship
To protect the environment, we organize programmes like mangrove nursery and Reforestation, Coastal and River Clean-Up, Community Based Environmental Solid Waste Management, Environmental IEC Campaign and Eco-Academy

B. Food Security and Sustainable Livelihood
To ensure a sustainable livelihood for the community, eco-tourism include Buhatan River Cruise Visitor Center Buhatan River Mangrove Boardwalk are run by the community. Others include Organic Vegetable and Root crops Farming, Vegetable and Root crops Chips and by-products Processing and establishing a Zero waste store.

C. Empowered Communities
To empower the community, we provide product and Agri-Enterprise Development Training, Immersion and Learnings Exchange Program, Earth Warrior Training and Community Based Social Entrepreneurship Training

Author

Athanasia Price

Strategic Communication Lead at Griffith Centre for Systems Innovation

Athanasia Price is the Strategic Communication Lead at Griffith Centre for Systems Innovation. She brings over 20 years’ experience in internal and external communication across government, industry and start ups on multiple continents. At the Centre she is embedded in the action research and project work ensuring a deep understanding of systems innovation. Her current focus is on ways to tell stories for systems change and how to gather people for transformative change. 

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