• AngelSpan

    The core of this piece is sound – that outcomes should match the ‘branding’ of the organization. The devil is in the details about who defines ‘impact’ or measures outcomes.

    Many organizations in the philanthropic community are struggling with this very topic. Who or what external organization defines impact or outcomes, and what are the implications if outcomes don’t measure up? Should the philanthropy be shut down due to lack of effectiveness, or do they simply go find other, less ‘expectant’ patrons to support the passion project? What is the ‘return on investment’ of both patrons’ capital, and the human capital deployed?

    What metrics (GIIN are defining these currently) define social/impact outcomes for for-profit organizations?

    Would philanthropies accept the same metrics? If not, why not?

    The tax structure of the organization should not define the degree impact is expected and measured.

    The for-profit/impact movement is evidence that patrons are seeking a more satisfactory returns on their benevolent support beyond their name in the annual report and invitation to a nice dinner.

    Clearly, some social needs are not suited for for-profit models and deserve philanthropic support. But conversely, a 501c3 designation does not make a particular organization worthy.

    Sadly, there are LOTS of silly for-profit business wasting millions on the 137th mobile/social/big data/in the cloud solution to sell more stuff to more people.

    Capitalism sorts them out eventually.

    The same will apply to impact investments as well.

    Fortunately, the inspired investors/patrons looking at and supporting impact investments want both ‘psychic’ returns, as well as financial expectations and accountability that the for-profit model requires.

  • Reana Rossouw

    Thank you for a brave new view on the topic. I also agree with Angel’s comment on the relevance of SLO applied to philanthropy.

    In my humble opinion – there is no case study, evidence or feedback of these investments on 1) negative impact 2) unintended impact – but only the good news gets reported.

    For instance – if there is an investment into a solar project for the benefit of a particular community or constituency – what if the benefit is not extended to neighboring communities and now there is rivalry, migration, civil unrest and protests because of lack of access to the service.

    Or – what if the investment is aimed at building a factory – and what gets sold or reported on as good news is the number of jobs created (only) – but there is no feedback from people that were or are excluded from the value created i.e. gender disparity – or discrimination against women to having (no) access or opportunity to share in some of the benefits of the potential jobs created?

    Or – there is the assumption that the investment will create ‘new capital’, For instance – now that we have built a factory, trained so many people, created so many jobs and assets – but the investor actually remove the capital from the community – by diverting the interest/dividend and spending or redeploying it elsewhere. Then the new capital created is only temporarily – short term! (i.e. not reinvested nor shared).

    Furthermore, there is also the mistaken assumption that when an investor moves in – the resources he is going to use in creating value or generating new capital – is available for “FREE”!. For example – resources available that will generate this new value i.e. water – what if this new venture leaves the community water stressed, or energy – there is no longer enough to go around – or the new venture is taxing or putting strain on existing infrastructure? Or what if the new venture – destroys existing value i.e. disrupts existing capital through bringing about new competitiveness or survival for what was there previously. Something we have seen in Africa when big retailers move in and dislodge existing smaller retailers out of a system.

    In this regard there is also the assumption that ‘beneficiaries or recipients’ – come for free or existing community assets is for free or is totally disregarded. For example – i.e. existing infrastructure (roads, clinics, schools, hospitals paid for by local’s tax money).

    In closing – I think your articles is interesting – asks a very important question – one that warrants a lot more thought and should be answered and responded too by impact investors.

    Thank your insights.