Leverage for impact

Building on these experiences, the UBS Optimus Foundation tested hybrid financing instruments (Blended Finance) that imposed greater discipline on early-stage social enterprises without overburdening them. These transactions deepened the Foundation’s understanding of risk management, incentive design to maximize impact at the enterprise level, and tailored governance structures – always guided by clearly defined impact objectives as the central reference point.

A core insight emerged: Individual Outcomes Contracts can only be scaled to a limited extent. In response, the UBS Optimus Foundation initiated the SDG Outcomes Fund, a USD 100 million Blended Finance fund domiciled in Luxembourg with a 12-year term. The Foundation provides at least 20% of the fund’s capital as first-loss capital in order to mobilize institutional investors. The USD 100 million target was reached in mid-2025, and through the fund, more than 100,000 children in Sierra Leone and Ghana have already benefited from improved access to quality education.1

The fund marks the transition from proof of concept to the systematic scaling of outcomesbased financing across the education, health, and environmental sectors in Africa and Asia.

In parallel, the UBS Optimus Foundation built a portfolio of direct impact investments – financed both through UBS donations and contributions from clients interested in innovative finance. By the end of 2025, the “Accelerate the Future” portfolio comprised 19 investments with a total volume of approximately USD 30 million, with a focus on Africa as well as South and Southeast Asia.

Key lessons learned included the need for patient capital, cash flow aligned repayment structures, and robust governance – particularly in the context of equity investments. Direct investments are not viewed as a replacement for traditional grant-making mechanisms, but rather as a means of strengthening high-impact organizations and making them financially sustainable over the long term.

Practical recommendations from the UBS Optimus Foundation for other foundations:

• Innovative finance is most effective when it complements, rather than replaces, traditional philanthropy.
• Critical success factors include institutional capacity building, clarity on additionality, risk awareness, and a willingness to learn and adapt structures over time.
• When applied appropriately, innovative finance can significantly expand the impact and reach of philanthropic capital – while maintaining a strong focus on demonstrable impact.

1 SDG Outcomes Fund hits USD 100mn target with anchor commitment from the European Union, https://www.ubs.com/global/en/media/display-page-ndp/en-20250703-sdg-outcomes-fund.html

An initial step in this development was the indirect application of innovative finance instruments. For approximately three years, the foundation has allocated funding to specialized organizations that themselves deploy innovative finance mechanisms – for example, working capital solutions or loans for social enterprises. The foundation provides traditional grants to these intermediaries but deliberately forgoes financial returns from the instruments used. Instead, funds remain within the respective impact area and are reinvested on a recurring basis. This approach allows the foundation to gain experience with entrepreneurial models without having to establish complex structures internally.

In parallel, the foundation has worked to create the internal conditions necessary for direct implementation. This has included legal and tax assessments – particularly in light of changes in tax authority practices in the Canton of Zurich – as well as adjustments to internal processes. A key learning from this phase is that smaller foundations often lack sufficient investment volume to justify building their own structures. Collaboration with specialized partner organizations has therefore proven to be an effective approach.

Based on these experiences, the foundation plans to directly apply entrepreneurial funding instruments in the future, such as recoverable grants or other repayable funding models. The aim is not to generate financial returns, but rather to use philanthropic capital more efficiently: when a portion of the funds is returned, it can be redeployed to support the foundation’s mission.

Key practical insights:

• Take a phased approach: Starting with indirect models reduces risk and enables learning over time.
• Leverage partnerships: Specialized intermediaries can provide capabilities that smaller foundations cannot easily build themselves.
• Embrace risk as a strength of philanthropy: Foundations can intentionally take on higher risks than traditional investors, thereby playing a vital catalytic role in the broader ecosystem.

Over time, it became clear that supporting start-ups is highly resource-intensive for a relatively small foundation with limited staff capacity. Equity participations require ongoing engagement: reports must be reviewed, annual general meetings attended, and decisions made regarding capital increases. At the same time, many start-ups develop more slowly than expected, and the anticipated rapid breakthroughs often fail to materialize.

A second challenge also emerged: successfully selecting start-ups requires specialized expertise. Assessing technology-driven business models differs significantly from evaluating traditional grant projects. For foundation boards and management teams, whose competencies often lie primarily in grant-making, this role can be demanding.

Against this backdrop, the foundation decided to realign its strategy. Since 2021, it has no longer invested directly in start-ups, but in innovation. The Hasler Foundation has focused on simpler funding instruments that are better aligned with its resources and mission.

A key instrument today is so-called “catalytic” grants. For example, the foundation supports research projects that serve as a precursor to larger funding applications to public funding bodies. The aim is to increase the likelihood of success of these applications and thereby mobilize additional funding. In other cases, the Hasler Foundation provides deficit guarantees for events or projects, creating planning certainty while also attracting additional funding partners.

Practical recommendations for other foundations:

• There is no blueprint: Innovative finance is not a fixed instrument, but a continuous process of learning and adaptation.
• Recognize limitations: Foundations should select funding instruments that align with their own resources and capabilities.
• Focus on feasibility: Foundations can often achieve impact using relatively simple instruments.

From a conventional investment perspective, providing convertible loans at such an early stage involves considerable risk, particularly in the field of medical innovation, where many projects ultimately fail to reach commercial viability. Technological obstacles, regulatory requirements and limited market uptake can all prevent promising ventures from scaling successfully. The foundation recognizes these risks as an inherent part of its approach. Rather than replacing traditional philanthropy, innovative finance provides an additional mechanism for supporting projects with the potential to generate both social impact and long-term financial sustainability. Unlike commercial investors, the foundation can tolerate financial losses because its primary objective is to deliver societal benefit.

Innovative finance therefore remains a complementary element within the foundation’s broader funding strategy. The majority of funding continues to be provided through traditional grants, for example to support research projects and nonprofit initiatives that do not have a viable business model. Innovative finance instruments are primarily used where innovations have the potential to become financially sustainable over time, such as medical technologies, digital health solutions and new healthcare services.

Beyond financial support, the USZ Health Innovation Hub plays an important role as a convening platform. It brings together researchers, clinicians, business professionals and potential investors, enabling projects to be strengthened not only financially but also strategically. By fostering these connections, the Hub also increases the likelihood that successful innovations will attract additional investment and achieve wider adoption over time.

Practical takeaways for other foundations:

• Innovative finance instruments can enhance and extend the impact of philanthropic capital by supporting the development of financially sustainable solutions.
• Seize opportunities to complement traditional grant-making: Innovative finance can serve as a valuable addition to conventional philanthropic funding, particularly where projects have the potential to generate long-term revenue or attract future investment.
• Adopt a blended approach: Innovative finance works most effectively alongside traditional funding instruments, which remain essential for supporting many research, charitable and early-stage initiatives.

In practice, the Trafigura Foundation employs a range of instruments. These include investments in locally rooted funds with deep expertise in the Global South, as well as repayable loans, with scope to adopt additional instruments as its approach evolves. Financial support is complemented by non-financial contributions, including access to networks, strategic advice and specialist expertise.

The transition has not been without its challenges. Internally, it required a shift in mindset. Whereas grants are often perceived as straightforward, one-off disbursements, investment-based approaches can give rise to greater caution and risk aversion among decision-makers. Regulatory and legal considerations add a further layer of complexity, particularly in relation to tax law and foundation governance. Developing the necessary infrastructure, systems and capabilities therefore requires both time and sustained commitment.

Despite these challenges, the foundation views itself as a pioneer within the Swiss philanthropic landscape. It deliberately combines several roles, acting simultaneously as an investor, catalyst and connector. Through initiatives in Geneva, it also seeks to engage other stakeholders and encourage collaboration and knowledge exchange. One lesson has become clear: the transition towards innovative finance will only achieve its full potential if more foundations are willing to embark on the same journey.

Practical insights for other foundations:

• Entering the field through partnerships can reduce complexity and provide access to established expertise, for example by investing through existing fund structures.
• Developing internal capabilities is critical, as innovative finance demands specialized knowledge and competencies beyond those typically associated with traditional grant-making.
• Foundations that are willing to act as catalytic funders by assuming early-stage risks can unlock additional capital and achieve greater impact at scale.