Increasing our Impact
That’s a question that consumes considerable time in the philanthropic world. Whether it’s an individual donor, a family foundation, corporate giving program, major national foundation, or community foundation, we all want to know. What can we do to ensure that our charitable dollars are put to the best use – and make the biggest difference for the causes that matter to us?
The “impact investing” movement is right in the middle of that discussion. The term impact investing describes a range of investment practices intended to generate social and/or environmental impact AND a financial return. In other words, impact investing actively seeks to make a positive impact by investing not just for financial return, but also in activities that benefit the community, such as in clean technology enterprises, low-income housing, or some other social goal.
For decades, the rule of thumb for foundations that wanted to exist in perpetuity has been to put out 5% in grants, and invest the rest in the market, so that the corpus grows and generates more money for future grants.
Instead of just investing it in traditional ways, what if we invest it with the goal of making a social impact AND generating a financial return?
Last week, I joined 600 or so foundation colleagues at the Mission Investors Exchange Mission Forward conference in Chicago. All of us are engaged in impact investing, or investigating how to do it.
For foundations moving into impact investing, it’s simple. To quote Dana Bezerra, President of the Heron Foundation, “Five percent of the assets doing 100% of the work just isn’t enough.” The Heron Foundation has pledged that 100% of its assets will be directed to impact investing.
This movement has said, let’s take our investment assets and see if we cannot put them to use in a way that helps our mission. Ford Foundation President Darren Walker, which has made a major commitment to impact investing, put it this way: “Philanthropy can no longer be defined by the pursuit of investment alpha. I’m a capitalist but the current market system is delivering too few benefits for the people we serve.”
Over the past 20 years, foundations near and far, and small and large, have committed to expanding the impact of grants by taking some portion of investment dollars – and making sure they too are moving the mission forward, whether by inspiring sustainable agriculture, or local job development, or reduced dependence on fossil fuels.
I’ve been hanging around this world for about 10 years, since my first days at the Vermont Community Foundation. It’s exciting to see how dramatically this field has grown since then. Back then, there were probably a couple dozen community foundations doing any impact investing. Today, it seems there are few community foundations that are not thinking about it.
At the Delaware Community Foundation, our work is under way. Some fundholders have already decided to invest their funds not in our primary investment portfolio, but in our screened, “socially responsible” pool. (The financial returns in that pool have been great, by the way.)
Even more directly, the relatively new DCF Social Impact Fund, funded in significant part by our friends at Discover Bank, has already made two impact investments – one to help bring to market a new chicken-manure bio-digester (you can see the team that worked on the project at the left), which makes use of more of the chicken waste product. The other investment is coming. Watch for an exciting announcement about that in the coming weeks.
There’s more to come. In the coming months, we’ll not only be announcing the exciting impact investment I mentioned above, but we’ll also be hosting fund-holders and others who want to become involved in our impact investing work. It’s part of the future of philanthropy. It’s part of the future of the DCF, too.
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I serve as Chair of the Mission Investors Exchange board. To learn more about impact investing, check their website.
If you’re interested in participating in our efforts around mission investing, I’d love to talk with you. Please drop me a line or give a call ([email protected])