Social Impact Investing Explained

Social Bonds

For decades, the primary tool available to philanthropists were cash gifts and grants to nonprofit organizations. In the ‘60s that began to change as forward thinking organizations started offering low-interest loans to create low-income housing.  Today philanthropists employ multiple tools to harness the power of capital markets and spur societal change:

  • Debt offerings such as bonds to improve municipal water systems
  • Microfinance
  • Deposits with Community Development Financial Institutions (CDFIs), and
  • Mission Related Investments, such as investing in new diagnostic technology to improve health outcomes.

These examples illustrate how strategic financial investments, coupled with innovate business models, can serve as a catalyst for an even greater impact.

In fact many entrepreneurs argue that the world’s most pressing large scale problems might better be addressed by business rather than nonprofits at all—universal access to high-speed internet, tackling global waste (e.g. resource recovery) and, as featured in this WIRED Magazine article, phone applications to enable individuals and families to manage food stamp benefits.

All donors want confirmation that their dollars are being put to work in a measurable way.  Social Impact investors measure their return on investment by benchmarking social outcomes and financial returns.

Two common reasons impact investors partner with Rodman & Associates is to receive support for a one-time need, such as drafting an Investment Policy or research into a specific field of interest, and to increase long term capacity through annual evaluations of social return, which can insure the needle is moving–and in the right direction.

Interested in learning more about Impact Investing for yourself or your clients?  Let’s have lunch.