Innovative investment is paying off for youth charities

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Posted on 12 Sep 2024

By Matthew Schulz, journalist, Institute of Community Directors Australia

Chenara Youth Back Track — Chenara, 16, is among beneficiaries of the Future Generation investments model which funnels millions to youth charities each year. Picture: BackTrack

A unique Australian investment vehicle is on track to grant more than $100 million to Australian youth charities while making healthy profits for investors.

Nearly 10 years after its inception, Future Generation’s philanthropic model involves carving off a small slice (1%) of its $1 billion asset base each year for charities.

It is expected to comfortably reach a $100 million funding milestone by 2030.

While the primary purpose of the fund is to make money for shareholders – and by recent reports it appears to be doing so handsomely – a significant secondary purpose is to help charities, with the focus on supporting children and youth at risk, and promoting wellbeing and preventing mental ill-health, also for young people.

Helping young people get back on track

The funding is helping young people like Chenara, 16, to turn their lives around.

The teen is a beneficiary of the BackTrack program, which received $484,000 from Future Generation for its 2023 program. The charity was founded in Armidale, NSW, and its mission is to do “whatever it takes, for as long as it takes” to keep vulnerable kids alive, out of jail and with a chance of chasing their dreams. The program offers education, training, diversions, accommodation and jobs.

In a case study featured in an impact assessment of Future Generation funding, Chenara revealed she had struggled with a chaotic home life and, after her grandfather died, started getting into trouble at school.

“I went through a lot growing up. My parents fought constantly and their abuse of each other really affected me. In 2022, when my Pop passed away, I stopped being the bright little girl I was. I started to muck up in school, get into fights and even do crime. Nobody was looking out for me, so most nights I stayed on the street or couch-surfed. I was constantly thinking about suicide, and I even tried to end my life more than once. I knew I wasn’t okay and needed help.

“Someone recommended BackTrack, and since then, my whole life has changed. BackTrack makes me feel like I’m appreciated and a part of their family. My favourite part of the BackTrack program is giving back to the community – going to people’s houses and helping with things that they can’t do.”

Prevention is such a priority because for many reasons economically, prevention is a lot more cost effective than treatment services."

Future Generation social impact manager Emily Fuller

Future Generation Partners Supplied — Future Generation leaders and some of its social impact partners, including (L-R): Human Nature CEO Sharyn White, Youth Opportunities CEO Erin Faerhmann, Future Generation Global chief executive Caroline Gurney, Founder and Chair of Future Generation Global Geoff Wilson, BackTrack Youth Works founder and director Bernie Shakeshaft, and Happy Paws Happy Hearts Foundation co-founder Zoe Black. Picture: Future Generation

How the funding works

Unlike other impact investors, Future Generation does not invest in impact-related activities such as social enterprises seeking a dual financial return and social benefit. And unlike many corporate models driven by ESG (environmental, social and governance) commitments, the fund doesn’t simply donate a slice of the profits.

Instead, it invests in Australian and global stocks. The trick that enables millions to go to charity is that Future Generation’s fund managers – a roll call of some of the country’s most sought-after investment experts – do their work for nothing.

As a result of that pro bono support, the organisation doesn’t need to pay fees for management, performance, service providers, board members or investment committees. Those savings are redirected into doing good.

Importantly, the commitment to giving away assets means profit fluctuations don’t affect payments, meaning funds for not-for-profits are consistent and can involve multi-year commitments.

Over nearly a decade, Future Generation’s two main investment vehicles have given $87.2 million to charity, including $6.8 million in the 2023 financial year – a sizeable chunk of its 2030 target of $100 million.

FGG Impact Report2023 — The Future Generation Global Impact Report has outlined the results of the investment in social good. Tap here to examine the full report.

Future Generation companies include Future Generation Australia (FGX) and Future Generation Global (FGG), which invest in Australian and global stocks respectively.

There are currently 24 organisations involved as social impact partners. For Future Generation Global these are:

BackTrack
Big hART
Happy Paws Happy Hearts
Human Nature
I CAN Network
Live4Life
Mind Blank
Prevention United
PROJECT ROCKIT
ReachOut
Smiling Mind
WANTA Aboriginal Corporation
Westerman Jilya Institute
Youth Opportunities

For Future Generation Australia, the beneficiaries are:

Act for Kids
The Australian Children’s Music Foundation
The Australian Indigenous Education Foundation
DEBRA
Diabetes Kids Fund
Giant Steps
Lighthouse Foundation
Mirabel Foundation
Raise Foundation
Youth Off the Streets

Future Generation has been able to attract some heavy hitters to steer the ship, with Philip Lowe, the former governor of the Reserve Bank of Australia (RBA) chairing Future Generation Australia (his sole board position since leaving the RBA), while Jennifer Westcott, the former chief executive of the Business Council of Australia, joined Future Generation Global as chair late last year.

Impact measurement guides spending

There’s no doubt the funds are having an impact, because there is evidence.

According to the recently published Future Generation Global Impact Report 2023, which tracked FGG funding over two years, the fund was able to support 14 not-for-profits and more than 5.3 million young people. FGG’s charity focus is on promoting wellbeing and preventing mental ill-health among young people.

Caroline Gurney and Philip Lowe. — FGG chief executive Caroline Gurney in conversation with chair and former RBA governor Philip Lowe.

The report followed a strategic review of FGG’s funding, which highlighted the fact that existing government funding had been unable to counter a surge in mental health conditions in young people, with as many as 38% of people aged 16–24 years experiencing a mental health problem between 2020 and 2022.

The review prompted FGG to divert funds from larger established charities and direct them to smaller high-impact charities.

FGG now stands as one of the biggest private funders of youth mental health in the country.

Future Generation founder and director Geoff Wilson said the company “has been at the forefront of helping young Australians since it was founded in 2014”.

He described the collection of charities it was helping as “a portfolio of not-for-profits” and said that by measuring their impact, “we continue to be at the cutting edge of philanthropy in Australia”.

Future Generation chief executive Caroline Gurney said that the first year of the report demonstrated the “remarkable” individual and collective impact of FGG’s partners, and the firm would use the data in future to push for more investment in preventing mental ill-health in young people.

The company’s social impact manager, Emily Fuller, said in a video update that there was a good reason for the organisation shifting its focus to mental ill-health prevention.

“Prevention is such a priority because for many reasons economically, prevention is a lot more cost effective than treatment services. Obviously, if you can stop something from happening, or developing, or becoming acute, you save a lot of money over the long term, and morally of course everyone would choose to spare a young person and their family the experience of mental ill health, so unless we are able to front-load some of our investment, the financial bill and the human cost of mental ill health is only going to continue to grow.”

How can NFPs get a slice of the action?

Not surprisingly, not-for-profits are keen to access Future Generation funds, but the process is a rigorous one. Following a strategic review, Future Generation Global conducted an expression-of-interest round that attracted 175 applicants, narrowed down to the 14 selected partners with the help of a youth advisory committee.

It is expected that Future Generation Australia will conduct a similar strategic review of its programs in the near future.