Overview
The Challenges
From ecological restoration to the provision of sustainable livelihoods, countries have unique challenges and many different social, environmental, and political needs. There are also numerous capital sources, such as high-net-worth individuals (HNWIs), foundations, finances and investors, who are eager and willing to invest in projects that address these pressing global needs.
So, how do you connect the dots between the on-the-ground projects and the financial providers, facilitating the flow of money from where it is available to where it is needed? How do you mobilise money so it can be put to effective use and make a tangible difference to people’s lives?
The answer: by creating a fund – a mechanism with a clear mandate that pools money from numerous investors or donors and directs them towards a particular objective. When setting up a fund, there are four key building blocks for success:
- A clear strategy: Well-defined strategic goals, geographic scope and technical resources, with an agreed objective, need and mission.
- A defined mandate: A recognised mandate for the fund, as well as clear roles within member countries, and a defined policy and regulatory framework.
- An effective operational structure: Appropriate governance and transparency structures, defined roles and responsibilities, sufficient operational agility, and required staff capacity.
- A long-term funding model: Clarity on the investment return, as well as a clear cost-recovery model resource mobilisation strategy.
Assembling each of these building blocks requires a deep understanding of both the specific need that’s being addressed, and the structural elements and processes involved in setting up a fully operational fund.
The Solution
Having set up and worked on more than 20 different funds since its inception, Pegasys is ideally suited to providing this type of specialised service. Some of our existing fund work includes:
- Cubango-Okavango River Basin Fund (Angola, Botswana, and Namibia)
- Mekong (Southeast Asia)
- Department of Forestry, Fisheries and the Environment (DFFE) Waste Fund (South Africa)
- SADC Disaster Risk Reduction Fund (SADC region)
- Addis-Oromia Water Fund (Ethiopia)
- GIZ Guarantee Fund (South Africa)
- Cape Town Water Fund (South Africa)
- Tanzania Natural Infrastructure Fund (Tanzania)
Over time, the complexity of the funds and the degree to which they channel capital for investment – as opposed to simply grant-making – has also evolved. We are now supporting a diverse range of funds, with an increasing number of them directing capital for investment from the private sector.
The premise for creating a fund is simple: there’s a need on the ground, there are eager funders elsewhere. So how do we connect the dots and get the funders to support the needs on the ground?
Michael Vice, Principal
Results
The simplest way to illustrate our work is by highlighting three of the funds we are currently working on. Each fund is on a different continent, and comes with its own set of challenges and requirements.
1. The Mekong Fund
The client: The Mekong River Commission (MRC), Southeast Asia
The fund: The Mekong River is one of the richest areas of biodiversity in the world, with more than 20 000 plant species and 850 fish species discovered to date. What’s more, roughly 80% of the people living in the Lower Mekong River Basin depend on the river for their livelihoods. With this in mind, the Mekong Fund is sharply focused on creating sustainable livelihoods and facilitating ecological restoration.
Pegasys’s role: The Mekong River serves many purposes and requires careful management. When setting up a fund such as this one, it’s essential to have a firm grasp of the area’s political economy, as any action that doesn’t have careful thought behind it and political buy-in will fail. Having spent many years researching the area, Pegasys has a thorough understanding of how the participating countries will come together and align on a vision.
Current status: While setting up such a complex fund will take several years, the background research has been done and the focus is now on getting every country to buy in to the idea, understand its role and appreciate the value of the Fund. Once established, the Mekong Fund will improve the lives of hundreds of millions of people and protect hundreds of kilometres of river.
2. The Cubango-Okavango River Basin (CORB) Fund
The client: OKACOM
The fund: The Cubango-Okavango River Basin (CORB) Fund is an ambitious, multi-country initiative that aims to enhance livelihoods and improve ecosystem resilience around the Okavango River. Each of the three participating countries has its own existing and potential uses for the river – from hydroelectric energy to tourism and irrigation – and this Fund is an innovative financial instrument designed to incentivise and help the three shareholders to work together for their mutual benefit.
Pegasys’s role: Pegasys has done extensive work around innovating financial instruments – a skill set that comes in handy when setting up a Fund such as this one. As a long-term offshore impact investment vehicle (+US$250 million), the CORB Fund has two key objectives: to provide a return for international investors, while having a significant on-the-ground impact on the Okavango’s surrounding people and environment.
Current status: The Pegasys team has spent a lot of time considering how to facilitate the flow of money from wealthy people around the world into the Okavango area, thereby supporting sustainable livelihoods and promoting environmental protection and restoration. Armed with a deep understanding of the political economy, we are confident that the CORB Fund will achieve its objectives in the years to come, impacting the lives of millions of people and serving as an attractive investment opportunity.
3. The Sustainable Manufacturing and Environmental Pollution (SMEP) programme
The client: The UK Government’s Foreign, Commonwealth and Development Office (FCDO)
Implementing partners: United Nations Conference on Trade and Development (UNCTAD), SouthSouthNorth, and International Centre for Climate Change and Development (ICCCAD)
The fund: SMEP is a fund set up by the FCDO to tackle the problem of pollution and environmental degradation generated by manufacturing, industrial processes and plastic pollution. The objective is to provide funding to a range of organisations or individuals with suitable solutions (from technological, policy-driven, or offering novel scientific evidence) that would address these issues in sub-Saharan Africa (SSA) and South Asia.
Pegasys’s role: Pegasys acts as the programme manager of SMEP, which funds research and development (R&D) activities commissioned through open competition. Our role includes: running the calls for proposals; identifying promising activities, including technological solutions or new scientific evidence; providing funding; and, ultimately, helping the selected beneficiaries to evolve and scale their activities.
Current status: The programme is currently concluding its first large procurement focused on plastic pollution. Overall, the programme management unit (PMU) will procure £20 million towards research over the next four to five years, to enable the practical uptake of pollution-mitigation solutions.
The Numbers
With more than 20 years of public sector consulting, we really understand how it works. We also understand what the private sector wants and needs, and are able to design a solution that will work for both sides.
Daniel Seddon-Daines, Managing Principal
