Impact Investing

As needs in our communities grow faster than dollars, the Council is joining the conversation about unlocking new capital for social good. For decades, foundations have made impact investments that intend to generate financial and social returns to complement grants, partnerships, advocacy, and other tools in the philanthropic toolbox.

What is impact investing?

We define impact investing as any investment activity that intends to generate positive social and financial returns.

How is the Council involved?

In 2013, the Council is joining the impact investing conversation happening among foundations and other types of investors. As a connector, the Council is:

  • Listening to our members and making connections.
  • Organizing provocative conversations among foundations and other partners.
  • Aggregating resources to demystify the process.
  • Building relationships with thought leaders and intermediaries
  • Hosting an ongoing blog series on RE: Philanthropy.

How can you get involved?

  • Read and comment on the impact investing blog series.
  • E-mail us or take this survey to let us know what your foundation thinks about impact investing.
  • Follow the hashtag #impinv on Twitter.

Data gathered from 244 private and community foundations participating in the 2014 Council on Foundations–Commonfund Study of Investment of Endowments for Private and Community FoundationsTM (CCSF) show that the 142 private foundations participating in the study reported an average return of 6.1 percent for the 2014 fiscal year (January 1 – December 31, 2014), down from the 15.6 percent return reported for FY2013, while the 102 participating community foundations reported an average return of 4.8 percent for FY2014 compared to last year’s average return of 15.2 percent.

Impact Investing is a hot topic for foundations, philanthropists and investors alike. And rightfully so. The ability to do good by offering financial support with capital that can be recycled over and over for multiple initiatives and missions is an attractive compliment to traditional grantmaking and other support. Creating the ability to greatly extend community impact, it is no wonder that organizations and individuals are responding to this funding mechanism.

Governments, multinationals, businesses, and individuals are increasingly organizing to take action in response to climate change. Foundations can play an active role in this growing movement. View this webinar to hear from leaders in the Divest/Invest Movement about how you can take part.

In late May I attended a meeting in Atlanta focused on impact investing hosted by the Federal Reserve Bank of Atlanta, Southeastern Council of Foundations (SECF) and the Council on Foundations (Council) about impact investing. The Federal Reserve Bank of Atlanta’s collaboration with the philanthropic sector is a great example of the value of public philanthropic partnership. Impact Investing is quite familiar to many in philanthropy, but the number of entities actually practicing impact investing is much smaller. Fortunately, that is starting to change. Education and awareness building efforts such as this gathering in Atlanta are important for several reasons.

While the globalization of markets has dispersed investments around the world, we’ve hatched a plan to bring capital back to our communities in a transparent, coordinated, and collaborative way. I’m excited to announce Canopy, an innovative, member-owned, for-benefit company designed to advance regional investing—at scale.

The Social Impact Exchange exists to build a growth capital marketplace that supports scaling high-impact nonprofits in the U.S. Funders with shared interests convene in working groups (currently active in health and education) to identify and vet highly effective nonprofit initiatives primed for scale using a thorough due diligence process.

This flow chart was designed by the Community Foundation of Louisville to describe the process of evaluating, processing, and making impact investments in their community. It follows a similar model developed by the Greater Cincinnati Community Foundation, which is discussed in the Community Foundation Field Guide to Impact Investment.

While attending the Council on Foundations annual meeting in San Francisco last week, I learned about exciting new trends in philanthropy. The theme that really stood out was the graying lines of business, investing, and philanthropy. For profit companies are being founded with the specific purpose of creating social good. Venture capitalists are measuring a startup's social impact as value, and everyday investors are favoring social responsibility over financial returns. Was this a parallel universe or did I miss something in business school?