Giving Compass' Take:

• The Caterpillar Foundation explains its move toward impact investing initiatives rather than traditional philanthropic grants and check-writing. 

Impact investing may not work for every philanthropic goal. How do you determine when it's the best course of action?

• Read more about the direction of impact investing

The pipeline project—which was funded by the Caterpillar Foundation, the Rwandan government, and others, and led by charity: water, one of Caterpillar’s partner organizations—is a perfect example of a growing movement within the philanthropic world toward impact investing and strategic partnerships.

Over the past decade, donors have become increasingly hesitant to just open their pocketbooks and hope that other groups put that money to efficient use. Instead, they view their donations as investments in the greater good—they want to see results, i.e., returns on those investments—and the Caterpillar Foundation has been a leader and pioneer in this approach.

From a practical perspective, here’s how Together.Stronger. works: Rather than awarding a grant to a nonprofit with few or no strings attached, the Caterpillar Foundation mainly invests in programs with clearly defined performance outcomes. And to assess a program’s success, once a grant has been made, foundational staffers require those grant recipients to submit impact reports showing concrete results. The team spends significant time reviewing the reports, looking for hard numbers that show the foundation’s support has affected poverty through measurements like reduced homelessness, an increase in the number of people who have clean, running water, or rising literacy.

Beyond the Caterpillar Foundation’s work, the company’s employees are extremely giving of their time and resources. In the past, employees at the company’s Morton, Illinois, facility have volunteered to build a home for needy families in the community. Caterpillar Inc. employees and retirees have donated millions of dollars to United Way agencies throughout the United States and beyond.

Read the full article about impact investing at The Atlantic