Mobilising capital to fund early-stage innovations is central to Shell Foundation’s five-year strategy. These innovations are critical to advancing the social, economic, and environmental goals, creating technology and services at scale, which can reach under-served customers who are often excluded from the financial system.
Social enterprises face a crucial dilemma: How do they generate sufficient revenue and attract enough investment to cover their costs and expand their activities?
Impact-based financing mechanisms
Impact-based financing mechanisms – that recognise and finance environmental and social outcomes – enable these early-stage innovators to secure growth funding or investment from governments, development finance institutions, foundations, impact investors and other stakeholders for the social and environmental impacts they create.
Since 2017, in partnership with the UK’s Foreign Commonwealth and Development Office through their Catalysing Agriculture by Scaling Energy Ecosystems (CASEE), SF has supported Sistema.bio – a prominent social enterprise working in Africa, India and Latin America that provides innovative biodigester technology, training and financing to smallholder farmers.
Funding models
Sistema.bio has experimented with various funding models to maximise the scaling of biodigester technology and to make it more affordable and accessible to farmers worldwide. Over the past four years, Sistema.bio has engaged in several impact-based financing mechanisms to support its operations such as:
- Impact Bonds: Sistema.bio is participating in an impact bond designed to mobilise finance to support the scaling up of the production of clean cooking solutions by quantifying and selling health and gender co-benefits to outcome buyers;
- Voluntary Carbon Market: Sistema.bio is leveraging Gold Standard’s impact registry to monetise its SDG 13 credits in the platform for several projects in India, Latin America, and Africa;
- Energy Based RBF Programmes: Sistema.bio has accessed RBF funding for SDG 7. These schemes pay once the funder has verified energy access in the households during the project. This means that the company gets paid only after implementing the biodigester.
The report, “One Product, Four SDGs: How Sistema.bio’s Impact Unlocks Finance to Reach Farmers at Scale”, details Sistema.bio’s experiences with these funding mechanisms and offers insights for social enterprises considering impact-based financing to mobilise capital.