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 outcomes‑based 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/displaypage-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.

An initial step toward innovative finance was taken as early as the early 2000s. At that time, the foundation decided to specifically support start-ups, with the goal of accelerating the transfer of innovation from universities and research institutions into practice, thereby strengthening the development of the ICT sector. Between 2004 and 2021, the foundation invested in several early-stage companies, typically with limited stakes and without a primary focus on financial returns. These investments were internally treated as grant expenditure rather than as traditional investments. While there were individual success stories – some supported companies were later acquired by international technology corporations – the practical experience also revealed the limitations of this approach.

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 instead in the area of innovation funding. 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 traditional investor perspective, providing convertible loans at this stage involves significant risk. Particularly in the field of medical innovation where a large proportion of projects do not succeed. Technological challenges, regulatory hurdles, or lack of market adoption can prevent start-ups from scaling. The foundation considers this an integral part of its approach - innovative finance models represent an additional opportunity. Unlike traditional investors, it can accept financial losses because it primarily sees itself as a philanthropic partner focused on societal benefit.

Innovative finance remains a complementary approach. Most of the funding continues to be distributed in the form of traditional grants, for example for research projects or nonprofit initiatives without a business model. Innovative finance instruments are primarily used where innovations may also become economically sustainable over the long term – such as in medical technologies, digital health solutions, or new healthcare services.

Beyond financial support, the USZ Health Innovation Hub plays a key role as a convening platform. It brings together researchers, physicians, business professionals, and potential investors. This enables projects to be developed not only financially, but also strategically. At the same time, this connectivity increases the likelihood that successful innovations will attract additional investors and scale overtime.

Practical takeaways for other foundations

• Innovative finance instruments can amplify the impact of philanthropic capital.
• Seize opportunities: Innovative finance instruments are a valuable complement to traditional grant-making (a fonds perdu).
• Combine approaches: Innovative finance works effectively alongside traditional funding instruments, which remain essential for most projects.

In practice, the Trafigura Foundation uses a range of instruments. These include investments in locally rooted funds with strong expertise in the Global South, as well as repayable loans – with the option to expand into additional instruments in the future. This is complemented by non-financial support, such as access to networks and strategic guidance.

However, the journey is not without challenges. Internally, it first required a shift in mindset: while grants are often viewed as straightforward one-off payments, investment-based funding approaches tend to trigger greater risk aversion among decision-makers. Regulatory considerations add further complexity, particularly regarding tax law and foundation oversight. Building the required infrastructure and capabilities takes time and resources.

Despite these hurdles, the foundation sees itself as a pioneer in the Swiss context. It deliberately assumes multiple roles at once: as an investor, a catalyst, and a connector. Through initiatives in Geneva, it is also working to engage other stakeholders and foster exchange. One thing is clear: the transition toward innovative finance can only succeed if more foundations join this journey.

Practical insights for other foundations

• Entry is often most effective through partnerships: for example, by investing in existing fund structures.
• Building internal capabilities is critical: innovative finance requires different expertise than traditional philanthropy.
• Embrace the catalytic role: when a foundation is willing to take on risk, impact can be significantly amplified.