Giving Compass' Take:

• Impact investors are starting to consider how a participatory approach to impact investments could help increase effectiveness in delivering social good. 

• How can more funders support and spread awareness about participatory design in impact investing?

• Read about the role of participatory grantmaking in philanthropy. 

Across the social sector, impact investors are assessing the grave threats posed by COVID-19 — both the existential risk to the global economy and to the companies and funds in which we have invested. More than anything, we are aware of the need to listen, learn, and adapt to this moment.

Philanthropic funds have been investing for social impact since at least the 1990s, but it is only recently that the idea has caught on in the wider world. A 2019 Global Impact Investing Network (GIIN) found that some two hundred and fifty institutions, mostly in the United States, Canada, and Western Europe, manage more than $239 billion in social impact investments around the world. At the end of 2018, GIIN estimated the full impact-investing market at $502 billion.

That's a lot of money, but who determines how it gets invested?

Currently, it is impact investors themselves who control the decision-making process, and the linchpin of their approach is an often-untested assumption that the benefits of the investment will trickle down to workers, communities, and/or consumers. That approach needs to change. While impact investing, with its profit imperative, is not the same as development aid or conventional grantmaking, it still seeks to deliver and measure social good. That's why we believe impact investors could take a few cues from philanthropic funds.

An effective participatory approach, which some call "user-design" or "co-design," could be integrated throughout the life-cycle of an investment — and the Open Society Foundation's Economic Justice Program has been supporting research by the Institute of Development Studies at the University of Sussex to map out how it might be done.

Read the full article about participatory design by Sean Hinton and John Gaventa at PhilanTopic.