Social impact investing — a concept frequently raised but not clearly defined or understood — presents a compelling opportunity for foundations and philanthropists to maximize the leverage and impact of their work. Innovative philanthropists with higher risk tolerances such as Pierre Omidyar, Jeff Skoll, and Bob Pattillo, along with leading foundations and social impact funds like the Kellogg Foundation, Calvert Foundation, Acumen Fund, and Bill & Melinda Gates Foundation, are increasingly using social impact investing to expand their influence and introduce market-based solutions to the complex world of social change.
The increased interest of the philanthropic sector in social impact investing is driven in part by the desire of philanthropic funders and private investors to fuel sustainable interventions that address economic inequities and systemic, structural barriers to economic and social development. Leaders in the field believe that traditional charity often meets immediate needs but too often fails to enable people to solve their own problems over the long term. Accordingly, the social impact investment approach aims to catalyze the power of private markets to stimulate long-term social, economic, and environmental solutions.
Definition of Social Impact Investing
To date, no single definition of social impact investing has taken hold. The Global Impact Investing Network, a group of organizations working to strengthen the field of social impact investing, defines it as investments that “aim to solve social or environmental challenges while generating financial profit.” This approach contrasts with “socially responsible investing,” which uses negative screens to avoid investments in companies whose behavior is deemed “bad” or “harmful.”
Ashley Allen, via PND –.