When Did Charity Become a Bad Word?
Everywhere you turn these days, “investing for impact” seems to be at the forefront of social innovation thinking. At conferences, in the media, and in education, the term “impact investing” – defined as investment that aims to solve social or environmental challenges while generating financial profit – seems to be getting all the attention. Somehow, good old “giving” has gone out of vogue. But what is the field of social value creation losing if we leave straight philanthropy behind?
It all started with the article by Chris Letts, William Ryan, and Allen Grossman, in the March 1997 Harvard Business Review, “Virtuous Capital: What Foundations Can Learn from Venture Capitalists.” The authors argued that traditional philanthropy has had lackluster performance and would benefit from the infusion of venture capital techniques: adopting performance measures, placing large bets on chosen organizations, working closely with them to produce results, and exiting at the appropriate time. At the center of their model was the concept of treating funding as an investment rather than a charitable grant – with corresponding expectations of return on investment, operating efficiencies, and management oversight. With this, “venture philanthropy” was born.
In the late 1990s into the 2000s, venture philanthropy evolved and contributed in many positive ways to the social good. The emphasis on funding an organization, not just a particular program, led to a commitment to long-term funding and unrestricted funds, which was beneficial. But the investment mindset seems to be taking hold everywhere and has been identified as the “preferred” social impact model.
The grid below provides an overview of the continuum of models and organizational structures that exist today to deliver social impact. Across the continuum the need for both donations and investment at times blurs. And some of that is to be expected and can be a healthy mix.
There are numerous books and articles on impact investing, below are a few links for those who want to know more about – how it’s defined and its value proposition.
Kevin Starr, Mulago Foundation
Jigar Shah, Carbon War Room
Whether and how impact investing will solve our social and environmental challenges will be proven over the next two decades. In all cases, whether investing or donating for social impact we must take responsibility that funds go to organizations that demonstrate real social impact with effective management, clear measurement and demonstrated results. However, I contend that we will still need charity. Donations are a form of gifting – giving without expectation of receiving back. A civil society that functions well is one in which generosity still operates in healthy ways. So a mantra to keep in mind is: Give generously, give frequently, give effectively.