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.

Over the past several years, no strategy for change has captured the imagination of philanthropy more than impact investing. In the United States and even more so in emerging markets, people and institutions with financial means are deploying those resources in new and sometimes innovative ways. Right or wrong, some of the newer players are convinced that donations alone are not the solution to our world’s challenges. Indeed, some have considered structuring new entities that leapfrog over more traditional philanthropic strategies. Even tried and true grantmaking, the backbone of American philanthropy for more than a century, has gotten the cold shoulder from some of these new players.

This is post is part of an ongoing impact investing series onRE: Philanthropy. In recent years, I have championed the potential of impact investing to unlock new forms and sources of capital for the social sector. But financial capital is just one piece of the puzzle. Through my work at the Rockefeller Foundation and more recently at Nonprofit Finance Fund (NFF), I have come to see that no single organization, idea, or type of capital is a cure-all for social issues.

This is the first post in an ongoing impact investing series on RE: Philanthropy. The new vision for the Council on Foundations, as President and CEO Vikki Spruill outlined in her blog post “Relevance + Network + Speed = Impact,” describes exactly how and why the Council is poised to support foundations interested in impact investing.

Despite having a steady job, a mom in South Carolina, who hopes to help her daughter go to college, cannot afford to pay rent in the city in which she works. A promising entrepreneur in Wisconsin has a great idea to improve his community but cannot get the loan needed to get his business off the ground. All over the country and globe, individuals aspire to live a comfortable life and contribute to their families and communities. Many circumstances contribute to the financial barriers that keep these individuals from achieving their dreams.

I first started working in the community foundation field more than 15 years ago. It goes without saying that I’m a big fan. I believe in this democratic model of philanthropy where the collective power of many creates powerful change. I’m also a fan because most community foundations understand that our work is constantly changing and adjusting to new needs. We cannot stand still. Indeed, the model of community foundation 15 years ago was vastly different than the one I see across the country now. The difference is the greater clarity about our leadership, and about our place-based expertise and connection. Community Foundation Week makes me reflect on that leadership.

As the practice of impact investing matures, evolving from a peripheral concept to a mainstream practice, the momentum around this nascent industry is growing. At a time when governments, foundations and donors look to do more with less, impact investing offers a means to generate social and environmental value with the potential for financial returns. However, this opportunity has often been limited by an overall weak capacity on the demand side of the equation and a resulting lack of investment-ready projects. These limitations undermine the impact investment industry’s quest to reach maturity, scale and sustainability.

Do you ever wish that your foundation had more money to solve social problems and transform your community? As need grows faster than grant dollars, many foundations are making mission and impact investments in order to unlock new capital for social good. Community foundations are investing discretionary and donor-advised assets to produce social and financial returns, and private foundations are doing the same with their investment portfolios. CEOs and trustees are discussing whether to make below-market PRIs, program-related investments, market-rate MRIs, mission-related investments, or all of them. In the same way foundations look to partnerships, host convenings, and inform public policy to augment what grants can accomplish, foundations are increasingly seeing impact investing as a viable tool to solve social problems.