Exploring resilience thinking in the design and operational processes of South African impact funds

Thesis (MCom)--Stellenbosch University, 2020.ENGLISH SUMMARY: Globally, countries are increasingly challenged as a result of social and environmental issues such as extreme weather conditions and the COVID-19 pandemic. The resulting pressure on public investments and higher risk levels are driving private sector involvement. In this context, impact funds can play a role in addressing social and/or environmental issues through a more market-based approach. The desired goal of impact investing is to realise a financial return for the investor while simultaneously bringing about a sustained positive social and/or environmental effect that is measurable. Furthermore, impact investment has the potential to contribute to more resilient futures. This study considers whether a resilience approach has the ability to enhance an impact fund’s capacity to deal with unexpected changes and subsequently increase the fund’s impact. The objective of this research was to explore the extent to which a resilience approach has been applied in the design and operational processes of South African impact funds because there is currently no research available that considers impact investing through a resilience theory lens. This research study therefore contributes to new knowledge on resilience thinking and the impact on investing in the broader investing space in the South African context. The objective was investigated by assessing whether the seven principles of resilience are incorporated into the design processes and operations of impact funds in South Africa. A qualitative research study was conducted by making use of semi-structured interviews as primary data and analysing publicly available fund factsheets as secondary data. Both the semi-structured interviews and fund factsheets were analysed by means of content analysis. The study found that there is some evidence to suggest that the seven principles of resilience are present or promoted in the design and operational processes of impact funds. However, in instances where the principles were present, the study was unable to ascertain conclusive evidence of a more nuanced and richer understanding of resilience through the application of the principles in question. It is recommended that impact investment professionals seeking to use resilience thinking principles in the design and operational processes of impact funds do so by enabling the creation of learning platforms, encouraging smart learning through experimenting, expanding opportunities for knowledge sharing between industry peers, incorporating the skills of a technical specialist during the design and operational processes, expanding the engagement process to beyond internal and technical stakeholders, moving towards scenario planning, stress testing informed by various stakeholders, and improving the reporting quality of factsheets beyond risk and return reporting.AFRIKAANSE OPSOMMING: Lande wereldwyd word toenemend uitgedaag as gevolg van sosiale en omgewingskwessies soos ekstreme weertoestande en die COVID-19-pandemie. Die gevolglike druk op openbare beleggings en hoer risikovlakke dryf privaatsektorbetrokkenheid. Gegewe hierdie konteks, kan beleggingsfondse ’n rol speel om sosiale en/of omgewingskwessies aan te spreek deur middel van ’n meer markgebaseerde benadering. Die doel van impakbelegging is om ’n finansiele opbrengs vir die belegger te verwesenlik en terselfdertyd ’n volgehoue positiewe sosiale en/of omgewingseffek wat meetbaar is teweeg te bring. Impakbelegging het voorts die potensiaal om by te dra tot meer veerkragtige toekomste. Hierdie studie ondersoek of ’n veerkragtigheidsbenadering die vermoe het om ’n impakfonds se vermoe om onverwagte veranderinge te hanteer te kan verbeter en gevolglik die fonds se impak kan verhoog. Die doel van hierdie navorsing was om die mate te ondersoek waartoe ’n veerkragtigheidsbenadering toegepas is op die ontwerp- en operasionele prosesse van Suid-Afrikaanse impakfondse omdat daar huidiglik geen navorsing beskikbaar is wat impakbelegging deur ’n veerkragtigheidslens ondersoek nie. Hierdie navorsingstudie dra dus by tot nuwe kennis rakende veerkragtigheidsdenke en die impak op beleggings in die breer beleggingsruimte in die Suid-Afrikaanse konteks. Hierdie doel is ondersoek deur te takseer of die sewe beginsels van veerkragtigheid toegepas word in die ontwerpprosesse en werksaamhede van impakfondse in Suid-Afrika. ’n Kwalitatiewe navorsingstudie is onderneem deur gebruik te maak van semi-gestruktureerde onderhoude as primere data en openbaar-beskikbare fondsfeiteblaaie te ontleed as sekondere data. Beide die semi-gestruktureerde onderhoude en fondsfeiteblaaie is ontleed deur middel van inhoudsontleding. Die studie het bevind dat daar bewyse is wat voorstel dat die sewe beginsels van veerkragtigheid teenwoordig is of bevorder word in die ontwerp- en operasionele prosesse van impakfondse. In gevalle waar die beginsels teenwoordig was, was die studie egter nie in staat om onweerlegbare bewyse vas te stel van ’n genuanseerde en ryker begrip van veerkragtigheid deur die toepassing van die betrokke beginsels nie. Die studie beveel aan dat impakbeleggingsvakkundiges wat die beginsels van veerkragtigheidsdenke wil gebruik in die ontwerp- en operasionele prosesse van impakfondse dit toepas deur die instaatstelling van die skepping van leerplatforms, slim-leer deur eksperimentering aan te moedig, geleenthede te verbreed vir die deel van kennis tussen industrie-ewekniee, die vaardighede van ’n tegniese spesialis te inkorporeer in die ontwerp- en operasionele prosesse, die betrokkenheidsproses te verbreed na meer as slegs interne en tegniese aandeelhouers, te skuif na scenario-beplanning en strestoetsing ingelig deur verskeie aandeelhouers, en die verbetering van die verslaggewingsgehalte van feiteblaaie na meer as slegs risiko- en opbrengsverslaggewing.Master