Philanthropy x Impact Investing 2.0

The 2023 Innovations in International Philanthropy Symposium convened a trailblazing group of individuals, diverse in many ways but united by a commitment to improve the wellbeing of communities around the world. It is rare, in my experience, to be in rooms with people who share a common cause but do not already all know one another. This alone made the gathering worth the flight cancellations and delays it took to get there!

I was new to the event, and thrilled to see beforehand that the agenda included three different sessions on impact investing. When I got there, I was even more excited to hear the conversations move beyond  the ‘why’ of impact investments (which is still an important topic), and to a set of more nuanced and pragmatic conversations about how foundations can most effectively use impact investments to advance their mission. I can’t do justice to the conversations I was fortunate enough to participate in and overhear, but I can share three points that stuck with me.

The first is how to overcome skepticism – from Trustees, advisors or others. Those of us who gather in sessions about impact investing for foundations tend to take for granted that the former has a place in the latter. But there are many more people – generally not in these sessions – who retain a bifurcated notion of philanthropy, which is to say funds are invested (solely) for maximum financial return while impact is (solely) achieved through grantmaking. Donors or Trustees or DAF clients who want to think more holistically about their assets need tactical advice about how to overcome the skepticism they encounter. It is helpful to hear from others who have navigated simlar dynamics, and to be knowledgable bout about the range of impact investing opportunities available across asset classes and impact goals. If all else fails, the act of asking the question ‘how is this [DAF/Foundation/philanthropic] capital advancing our mission and values?’ is helpful all by itself.

The second topic that stuck with me, on the flip side, is how to ensure that enthusiasm about impact investing does not translate into cannibalization of grant funding. I worry about this, especially for new donors, and was grateful to hear others raise the question. There are some impact goals that generally do not lend themselves to revenue generation (such as defending democracy); and even areas that lend themselves to impact investing (financial inclusion, climate, gender equity) still require grant funding to pay for public goods, capacity-building and advocacy. Each donor’s theory of change is different, and expanding the tools in the philanthropic toolkit increases the possibilities but also the complexity involved in executing against that theory of change.

My last important takeaway: just pick something and do it. It is easy to get stuck in a ‘paralysis of analysis’, to be overwhelmed by the different examples and options out there. Some donors think they lack the knowledge, or the size, to activate anything beyond their grantmaking for impact. In my session, we heard loud and clear that anyone can be an impact investor. You can bank with a values-aligned financial institution. You can ask your manager to vote your proxies according to your values. You can find different managers, or advisors. You can revisit your Investment Policy Statement. There are options that range from small and incremental to radical, and there is a next step for everyone.