Aligned with the drivers of the social crisis:
Fundación Chile will create a US$50 million fund to finance projects with social impact
• In an interview with Diario Financiero, Marcos Kulka, Fundación Chile's CEO, stated that this impact fund seeks to leverage resources from the private sector to finance projects with a social impact in areas such as education for the future and labor reconversion, agrotech, and the digitalization of small and medium businesses.
• The fund is expected to be launched during the first quarter of 2020.
* This interview was published in the Diario Financiero on December 30, 2019.
Fundación Chile (FCh) held four seminars in December under the banner ‘Chile Without Borders, Thinking About Inclusive Development’; where issues such as the transformation of industries, impact investments, the human side of the digital revolution, and inclusive cities were addressed.
These matters were part of the agenda prepared for the Climate Change Summit (COP25) before its cancellation, but ended becoming spaces to reflect on social crises and the role of the private sector, explains FCh’s CEO, Marcos Kulka. These thoughts served as an input for public-private organizations to redefine the focus of their actions for 2020, establishing the creation of an impact investment fund as its greatest workhorse, “aligned with the social crisis drivers“, says Kulka.
The fund seeks to leverage US$ 50 million from the private sector to finance projects that have a social impact in areas such as education for the future and labor reconversion, agrotech, and digitalization of small and medium enterprises (SMEs), which will hopefully be launched during the first quarter of 2020.
“There will be no place for companies and funds that do not respond to the society or to environmental issues. There is a quote by philanthropist Stephan Schmidheny, stating that it is ‘difficult to have successful companies in failed societies’, speaking of the role that companies will have and how they will evolve,” says Kulka.
Regards the interest of Chilean investors in participating in impact funds, the CEO comments that “Even though the current market is a ‘shy’ one, of about US$ 150 million, FCh’s role is to go out there, capture capital, and match it with the capacity to execute.” He says that at a global level, the market for impact investment reaches US$ 300 billion, with successful experiences in countries such as the United Kingdom. In order to learn from these practices FCh, alongside other institutions, is promoting the creation of the National Advisory Board or the ‘Boards’ of the Global Steering Group for Impact Investment (GSG), which is globally led by the Englishman Sir Ronald Cohen. The entity planned on holding the GSG Impact Summit 2019 in Chile during November 18 and 19, however due to the October 18th social outburst, it was moved to Argentina.
In addition to the impact investment, FCh’s CEO comments that they have four other targets for 2020 that seek to address the population’s vulnerable groups: cities, labor reconversion in the context of the digital transformation, education for the future, and open innovation with startups and digitalization of SMEs. In the area of cities, they are working with actors who have different views, including Sofofa to establish an initial diagnosis to determine the priority for the projects in this area. “We are building the project -it can be a roadmap-, we hope to have more clarity in the first quarter of 2020”.
“We will start with challenges to achieve inclusive and integrated cities and with pilot programs in two cities that will allow us to replicate it in others”, says Kulka. Another of FCh’s lines of action in 2020 will be to promote open innovation processes between large and small companies. “This is what we are doing with Expande, the open innovation program in mining, with which we have a potential of US$ 300 million in contracts, not including what is to come. And with Chile Global Ventures, where we launch challenges from large corporations,” says the executive. “Another area we are focusing in for the coming year will be the labor reconversion required by the digital transformation of companies.” Kulka states that “Two million workers in Chile need to be retrained, which has a direct impact on the social crisis. We are seeing boot camp systems for four to five months, so we can quickly move forward “.
Marcos Kulka comments that the Chilean crisis is not local, it responds to a global phenomenon. That is why, in the framework of Chile without Borders, they analyzed various crises and their possible solutions, such as the German reunification, Brexit, and the Detroit crisis of 2008. “Detroit had drops in GDP, looting, and fires. There were losses of US$ 18.5 billion and the private sector injected US$ 6 billion”.
“To overcome it, the role of the private sector was critical in terms of resource injections, as well as management. Without the privates it is impossible to get out of the crisis,” he says. In regards to the role that the Chilean private sector could play in overcoming the crisis, he says that “Things are already beginning to emerge to encourage its participation, such as the Donations Law, the creation of endowments and investment funds, and even companies can transfer the beneficial interests (usufruct) of a percentage of shares to improve workers’ pensions or their training. This has already been done to retain talent, but it could also be done to improve social protection for workers,” he says.
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