How can foundations achieve greater impact with the same level of resources?

This study outlines how innovative finance can contribute to this goal – drawing on the experience of the UBS Optimus Foundation and on an analysis of the Swiss foundation sector conducted by the Center for Philanthropy Studies (CEPS) at the University of Basel.

Learn more about:

  • The core principles of innovative finance
  • Practical recommendations for foundations
  • Case studies, including the UBS Optimus Foundation example

5 Principles of innovative finance

Rethinking impact

Rethinking impact: from individual grants to systemic change

Innovative finance goes beyond supporting individual organizations; it focuses on achieving sustainable solutions to societal challenges. It is always guided by the question of what additional support is required to create lasting impact.

Three cyclists on road

Recyclability of funds

Recyclability of funds: enabling repeated impacts from the same capital

Unlike traditional grant-making, the repeated use of the same capital is an explicit secondary objective. Through capital recycling, co-financing, or the mobilization of additional resources, a leverage effect is created, allowing the same capital to be deployed multiple times to achieve the desired outcomes. 

Hiking

A holistic perspective

A holistic perspective: understanding funding as a strategic combination of instruments 

Innovative finance intentionally combines a range of financing and support instruments . What matters is not the individual instrument s, but their effective interaction – aligned with the objective, the context, and the development stage of the organizations supported.

Pathway in mountain landscape, Engadine

Expanding one’s role

Expanding one’s role: from grant-maker to active partner

In innovative finance, foundations assume a more active role. They engage more closely with organizations, contribute expertise and networks, and support their organizational development. Impact is generated not only through capital, but through the interplay of financing, expertise, and connectivity.

Rowing team training on lake

Getting started

Getting started: innovative finance as a learning process

There is no single best entry point and no standard solution. Innovative finance evolves continuously through experimentation, learning, and adaptation. Successful foundations take deliberate first steps, reflect on their experiences, and continuously refine and expand their approaches.

Boardwalk in Appenzell mountains, Switzerland

Foundations of innovative finance

Introduction

How can foundations maximize their potential to support society? This practical guide illustrates – through real-world examples and in-depth analyses – how foundations can achieve a leverage effect through innovative finance.

The practical guide is intended to help foundations identify the form and methods of innovative finance best suited to their context and to encourage them to pursue innovative approaches to grant-making.

What is innovative finance?

Innovative finance refers to the targeted support of viable activities serving a charitable purpose through the strategic use or combination of various financing instruments , funding mechanisms, and accompanying structures. The objective is to increase the impact of funding by enabling capital to be deployed multiple times, by generating repayments, or by mobilizing additional capital. 

Methodology and basis of the study

The study is based on a combination of literature and document analysis, a quantitative survey, and case studies of Swiss grant-making foundations, complemented by qualitative interviews . These different methodological approaches were deliberately linked to enable a comprehensive overall perspective.

To structure the analysis and derive   actionable recommendations, an analytical framework was developed.

The framework comprises three key dimensions: intention, financing instruments  (allocation), and level of engagement (dedication).

Intention” describes the foundation’s objectives for the use of innovative finance.

Allocation” refers to the specific use of financial resources and the instruments applied.

Dedication” describes the level of involvement, as well as the depth and nature of the foundation’s engagement.

Allocation chart

How successful implementation works

Based on the analysis, three key fields of action for the practical implementation of innovative finance emerge.

Intention

How do I develop my foundation’s intention for innovative finance?

  • Review the foundation’s purpose with regard to its suitability for innovative finance
  • Build organizational readiness for innovative finance
  • Participate in networks and develop partnerships
  • Clearly prioritize impact and anchor it strategically
  • Establish the prerequisites for reinvestment and circular use of funds
  • Integrate innovative finance into the foundation’s strategic profile

Allocation

How do I identify the right innovative finance instruments for my foundation?

  • Understand innovative finance as a learning process
  • Align funding instruments with the foundation’s own resources and capabilities
  • Use repayment logic deliberately as a steering instrument
  • Start with simple, appropriate, and feasible instruments 
  • Place leverage effects and the catalytic role of funding at the forefront

Dedication

How can my foundation deploy innovative finance for a greater stronger social impact?

  • Strategically clarify and define the foundation’s roles
  • Purposefully strengthen network and ecosystem engagement
  • Build capabilities and develop the organization as a learning system
Hiker on hilltop

Intention graph
Figure 2: Motivations for innovative finance models (own illustration, based on Epstein / Yuthas 2014)

The case studies reveal four core motivations driving the use of innovative finance models. The following figure clusters these into four segments, arranged according to their significance for the foundation and their relevance for society. This illustrates that innovative finance is not about choosing between financial returns and impact, but about aligning multiple relevant motivations.

Hiker standing on hilltop

Allocation graph
Figure 3: Phases of innovative finance (own illustration, based on UBS Optimus Foundation 2025, p. 34)

Phases of Implementation

Regardless of the choice of funding instruments, innovative finance requires a systematic approach in order to effectively manage  the associated challenges and risks.

Mountains and trees

        

Dedication graph
Figure 4: Roles of grant-making foundations in innovative finance (own illustration).

Roles of grant-making foundations in innovative finance (own illustration).

Case Studies

UBS Optimus Foundation

Hiker standing on mountain cliff at sunset, Switzerland

UBS Optimus Foundation: Ten years of practical experience in impact-first investing

Over the past ten years, the UBS Optimus Foundation has evolved from a traditional grant-making organization into a sophisticated, impact-first investor. Outcomes-based financing and direct investments in social enterprises (e.g. through impact loans or equity participations) are now deliberately deployed as a complement to traditional grant-making. This transformation was gradual, deliberate, and learning driven – not ideological or abrupt. From an early stage, high-net-worth individuals and other foundations were also brought in as co-financiers. By contributing donations to the UBS Optimus Foundation, they were able to participate in these financing structures and benefit from the associated know-how and learning process.

The UBS Optimus Foundation’s entry into impact first investing began with Outcomes Contracts (Development Impact Bonds). These pay-for-results structures addressed both the growing demand from funders for measurability and accountability, as well as the Foundation’s philanthropic mandate. The UBS Optimus Foundation typically assumed the role of risk capital provider, supplying upfront funding and bearing the risk of loss if the agreed outcomes were not achieved.

A prominent example is the Quality Education India Development Impact Bond, which reached approximately 100,000 students and achieved learning gains that were 2.5 times higher than those observed in comparison groups – despite significant disruptions caused by COVID-19. A key insight was that robust social impact can be combined with capital repayments, allowing funds to be recycled for new impact. At the same time, the Foundation built internal capabilities in legal structuring, governance, and performance management.

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

Swiss Re Foundation

Family on mountain top overlooking Lake Lugano

Swiss Re Foundation: How can foundations integrate innovative finance into their existing practice – without fundamentally changing their structures?

The Swiss Re Foundation provides a compelling example of how a foundation can gradually build its capabilities in innovative finance. With an annual funding volume of around CHF 8 million, the foundation has, in recent years, begun to systematically pilot and expand entrepreneurial funding approaches. Overall, no more than 20% of its funding is intended to be deployed through such instruments.

The journey toward this goal has taken place in several incremental development phases. Starting with an indirect approach via specialized intermediaries, along with assessments of regulatory and organizational requirements, the foundation has identified ways to implement its own entrepreneurial funding models in the future. This shift was driven by two key observations. First, in many funding areas – such as climate and health projects in emerging markets – traditional grants are effective in early stages but can reach their limits later on. Second, while there is significant global capital available for impact investing, early-stage financing gaps remain common. Foundations can play a critical role here by assuming early-stage risks and thereby creating a pipeline for future investments.

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.

Hasler Stiftung

Hiker standing on mountain peak at sunset

Hasler Foundation: How can foundations identify the right approach to innovative finance for their needs?

The experience of the Hasler Foundation shows that the path toward suitable instruments is not always linear. Rather, it is a learning process in which different approaches are tested, their limitations are recognized, and the funding strategy is adapted accordingly.

The Hasler Foundation originated from Hasler Werke in Bern, a pioneering Swiss company in telecommunications and communications engineering. As the owner, the foundation assumed entrepreneurial responsibility for the continuation and development of the company over an extended period. As part of industrial consolidation, Hasler Werke became part of the Ascom Group. While the Hasler Foundation initially remained closely connected to Ascom, it gradually withdrew from its entrepreneurial role. This process of separation led to a fundamental strategic repositioning of the foundation. Today, the Hasler Foundation is an independent, nonprofit grant-making foundation in the field of information and communications technology (ICT). However, its DNA as a corporate foundation has been preserved.

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 a traditional investment. 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 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.

USZ Foundation

Buttercups on meadow

USZ Foundation: How large is the potential to create leverage with philanthropic capital?

The USZ Foundation is the charitable foundation of the University Hospital Zurich (USZ). Together with its donors, it supports medical innovations that directly improve patients’ quality of life. While its funding activities remain primarily philanthropic, the foundation introduced an innovative finance model for start-ups in 2024. This development reflects the reality that promising ideas with commercial potential regularly emerge from the hospital environment. However, the journey from an initial concept to a market-ready solution is often lengthy, and suitable sources of early-stage funding are frequently limited.

This is where the foundation sees its distinctive contribution. Through the creation of the USZ Health Innovation Hub, the USZ Foundation and the University Hospital Zurich have established a platform that supports early-stage projects and start-ups through coaching, access to networks and strategic guidance. To complement these activities, the foundation has also developed innovative finance instruments that provide financial support. Unlike traditional grant-making approaches, it can offer convertible loans to selected start-ups.

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.

Trafigura Foundation

Vineyard on Lake Geneva

Trafigura Foundation: How can foundations deploy their capital so that impact is not only created, but sustained over the long term?

For many years, the Trafigura Foundation relied on traditional philanthropy and grant-making. While effective in many respects, this approach often offered limited prospects for long-term sustainability. Projects frequently remained dependent on external funding, and achieving scale proved challenging. The impetus for change ultimately came from within the foundation itself, prompting a simple but fundamental question: how could entrepreneurial approaches be incorporated to create more sustainable impact?

Since 2023, the foundation has been laying the groundwork for integrating entrepreneurial philanthropy, also referred to as innovative finance, into its existing funding model. Alongside traditional grants, it now seeks to use impact-first investments that promote financial sustainability, thereby expanding its capacity to generate lasting social impact. The foundation sees its role as catalytic: reducing risk, attracting additional investors and mobilizing further capital. By acting as a first mover, it helps make projects investable that might otherwise struggle to secure funding. Any financial returns generated through these activities are retained entirely within the foundation and reinvested in support of its charitable mission.

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.

Want to learn more?

Innovative finance is not a standardized approach, but rather an evolving process. When applied effectively, it can help to sustainably expand the impact and reach of philanthropic capital.

Further results and insights from the study, as well as all case studies, are available for download in the full study.

Change starts with a conversation

Are you a grant-making foundation exploring innovative finance mechanisms?

Contact us for:

  • Advice tailored to your organization
  • Opportunities to participate in innovative finance mechanisms via a donation to UBS Optimus Foundation
  • Co-develop a tailored innovative finance portfolio for your foundation, in the areas of education, health and environment
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