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The Philanthropy World Is Embracing Impact Investing

Fast Company
This article is deemed a must-read by one or more of our expert collaborators.
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The Philanthropy World Is Embracing Impact Investing Giving Compass
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Giving Compass’ Take:

• More foundations are starting to utilize impact investing practices to help achieve the UN Sustainable Development Goals. 

• In what ways can your foundation pivot toward SDG alignment? Where is there room for collaboration to achieve these goals?

• Read about impact investors who are setting the tone for aligning with the SDGs. 


In 2015, the United Nations laid out its Sustainable Development Goals (SDG) to track global progress against massive social and environmental challenges like extreme poverty, inequality, and climate change. But hitting those goals will take more than creative public and private partnerships: it will cost money.

The good news is that, in just a year and a half since the call came out, the impact investing industry is picking up the slack.

In 2016, investors looking for financial returns that demonstrate social good improvement committed $22.1 billion to 8,000 investments. All told, the emerging industry, which is less than a decade old, has at least $114 billion in assets under management, according to a recent report by the Global Impact Investing Network, a nonprofit organization to increase the scale and effectiveness of impact investing.


Interested in learning more about Impact Investing? Other readers at Giving Compass found the following articles helpful for impact giving related to Impact Investing.

  • This article is deemed a must-read by one or more of our expert collaborators.
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    A More Enlightened Approach to SDG Impact Investing

    Giving Compass' Take: • Inspired by Steven Pinker' book, Enlightenment Now: The Case for Reason, Science, Humanism, and Progress, the writers for this SSIR article discuss how we must analyze the progress we have made on global issues. • They share how investors can become more enlightened when taking an SDG-aligned approach. The first recommendation: Read the Sustainable Development Goals UN Resolution.  • Read the seven reasons why we need to step up action on the SDGs.  We’ve been reading Enlightenment Now: The Case for Reason, Science, Humanism, and Progress, Steven Pinker’s recent book that Bill Gates called in his blog, “my new favorite book of all time.” We can see why: Pinker argues that the ideals of the Enlightenment—all centered on reason—brought the world untold progress and can help us make progress against the challenges of today. This is important, because big problems remain: Climate change looms, 700 million people continue to live in extreme poverty, nearly half of all deaths in children under age five are attributable to undernutrition. Pinker calls for the continuation, or even acceleration, of an enlightened approach to overcome these challenges. Many of them, of course, are now embedded in the UN Sustainable Development Goals(SDGs), including ending poverty in all its forms everywhere, and many investors have started to reference the SDGs in their investment products. With expectations of what impact investment can do to solve global problems already sky-high, with large investors scrambling to demonstrate their commitment to sustainability, and given the appeal and accessibility of the colorful SDG pictograms, one can see how this way of thinking would spread like wildfire. This SDG mapping is, at best, a good starting point, in that it’s making more people “SDG aware.” At its worst, however, it’s giving people the sense that there’s not much to it and that if we keep this up, we will soon achieve the SDGs. To the SDG investment community, we say: Wake up and smell the coffee. Much of what passes for SDG investing now is investing in companies and organizations that institutional investors were already investing in and that only have a tangential link to solving the problems as defined by the United Nations. Another big slice of the SDG investing pie is made up of investments in companies and activities that are, in fact, addressing one or more of the SDG challenges, but were already doing that before the investment was made. Are these investments facilitating or accelerating the activity? Usually not. Read the full article about SDG impact investing by Harald Walkate & Cary Krosinsky at Stanford Social Innovation Review


The Omidyar Network, a philanthropic investing group pioneered by eBay founder Pierre Omidyar and his wife, Pam, has certainly taken that approach “In some cases—perhaps even most—a strong positive correlation does exist between financial return and social impact. In other cases, a company can generate significant social impact even if its financial return is modest,” writes a team of Omidyar-affiliated authors tasked with explaining the new rules of this economy in a  Stanford Social Innovation Review report.

While carefully structured impact investing has proven it can generate profits comparable to standard investments, some groups–including many chasing SDG-alignment–aren’t necessarily using it that way. Roughly one-third of funders are comfortable taking below-market rate returns or break-even paybacks (so-called “capital preservation”) to grow the both field and slower rolling startups that might eventually make a bigger dent in these problems.

Shifting norms toward SDG alignment, in particular in a way that focuses on long term impact over short term gains may help set the standard for what’s expected as more traditional investors move into the space.

After all, the entire goal is to fund solutions that can actually improve the world.

Read the full article about impact investing and SDG alignment by Ben Paynter at Fast Company.

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