Over the past decade a quite revolution has been taking place in philanthropy.
Now its effects are starting to creep into the investment offices of foundations and endowments as well as the boardrooms and investment advisory businesses of banks and other financial market participants. Among the key players leading the charge: the U.S. Federal Reserve.
….The Federal Reserve Bank of San Francisco published a new book, along with the Nonprofit Finance Fund, titled What Matters: Investing In Results to Build Strong, Vibrant Communities. The book makes the case that philanthropy should be focused on outcomes, not outputs – another words, what the overall effect of a program is, rather than whether a certain initiative achieves its prescribed mandate. This could mean in the case of, say, a homeless shelter, a shift from counting beds occupied (an output) to helping homeless people get off the street and into full-time housing as well as tackling the underlying cause of their homelessness (an outcome).
“The challenge for philanthropy is that we have to interrogate the way we do business,” Walker said, speaking this week at the Federal Reserve Bank of New York in downtown Manhattan at an event organized to introduce the new book.
Andrew Plepler, a global head of ESG (environment, social responsibility and corporate governance) at Bank of America, said at the event that giving back to the community and interest in community investing have gone from a corporate responsibility function to a business interest.
“Institutional investors start tracking it as a proxy for good management,” he said. For banks today, he said, supporting community-based initiatives and other social and environment priorities such as climate change is “enlightened self-interest.”
Another reason why these changes matter to for-profit actors is money. That’s because an outcomes-based approach to tackling social problems is more easily adapted into investment opportunities.
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