Impact Investing: An Overview

July 7, 2015

This spring, five graduate students at the George Warren Brown School of Social Work at Washington University in St. Louis worked collaboratively to research and report on the rapidly growing field of impact investing.

Under this framework, charitable assets are used to invest in projects that generate revenue (financial return) as well as providing direct community benefits.

Thank you to Jennifer Dilley, Sarah Fisher, Michelle Mowry, Delilah Papke and Gulcan Yayla for their work.

A blog post based on their research follows.

GWB Students

Impact Investing Overview

Impact investing is an investment strategy where “investments [are] made into companies, organizations and funds with the intention to generate measurable social and environmental impact alongside a financial return” (Global Impact Investing Network, n.d.). This strategy merges the financial and philanthropic sectors and allows investors to “do more” with fewer dollars (Kathuria & Murray, 2013). Impact investments can be made across asset classes and generate below market-rate and risk-adjusted rate returns (Global Impact Investing Network, n.d.). There are five main impact investing vehicles: mission-related investments, program-related investments, social impact bonds, enterprise philanthropy, and hybrid models. Success is based on both social and financial returns, which are often measured using the Impact Reporting and Investing Standards (IRIS) metrics as a standardized form of measurement.

Program-Related Investing

Program-Related Investing (PRI) is an impact investment vehicle in which a foundation finances charitable organizations or commercial ventures for charitable purposes. PRI involves financing methods often associated with banks or other private investors—such as loans, loan guarantees, linked deposits, and equity investments—requires principal return, and earns a below-market, risk-and mission-adjusted return varying from 1-3% (Emerson 2003). To be program-related, the investments must significantly further the foundation’s exempt activities. The Internal Revenue Service defines PRI as any investment by a foundation that meets the following three criteria: (1) Its primary purpose is to further some aspect of the foundation’s charitable mission, (2) The production of income or the appreciation of property is not a significant purpose of the PRI, and (3) It may not be used to support any lobbying or political campaign activities (Internal Revenue Service, 2015). Between 2000 and 2010, the Foundation Center tracked 427 foundations that provided 3,757 PRIs totaling $3.39 billion.

PRI allows foundations to achieve their program-related goals, such as allowing the Rockefeller Foundation to increase asset ownership, accessing financial services and creating jobs for marginalized individuals. It also benefits foundations by helping them generate earned income, gain access to new funding, and develop new financial management history. However, PRI includes many challenges for smaller foundations that lack knowledge of PRI and expertise in PRI management. First, PRIs entail significant transaction costs that disadvantage smaller foundations. In addition, appropriate opportunities for smaller foundations may be difficult to find because of necessary due diligence and having programmatic, financial, and legal skills on staff (Raymond, 2010). Although PRI is a viable investment vehicle with the potential to generate financial and social returns, it is not an appropriate strategy for all investors.

Mission-Related Investing

Mission-related investing advances an organization’s mission and align its fiscal policies with its social objectives (Trillium Asset Management Company, 2007). It reduces disparities between funding and mission by using up to 100% of an organization’s assets to promote its mission and carry out fiduciary duty (Rockefeller Philanthropy Advisors, 2008). MRI is feasible for foundations, nonprofits, and for-profit corporations and can be made through cash deposits, fixed-income securities, private and public equities, and real estate (Aspen Institute, 2015). A key aspect of MRI is generating a satisfactory financial return. Optimally, MRIs earn a market-rate return (Richter, 2010) large enough to fund grants (Trillium Asset Management Company, 2007). Resources like the US Community Investing Index or the Calvert Mutual Fund can help organizations identify MRI opportunities.

MRIs’ strengths are their ability to align a foundation’s mission and fiscal policy by using the endowment to advance the mission. The return on an MRI can be used to fund grants, increasing the impact an organization can have on a social issue. Furthermore, as MRIs can be made at various rates of social and economic risk, organizations with both large and small asset portfolios can engage in MRI. Challenges include concerns about the risks to fiduciary duty, which requires the leadership to preserve the endowment by investing prudently (Rockefeller Philanthropy Advisors, 2008). Some organizations may feel forced to choose between social and financial returns in MRI (Aspen Institute, 2015). Furthermore, as it can be hard to recruit financial advisors who are well versed in MRI, these concerns can be difficult to resolve (Kramer & Cooch, 2007).

Social Impact Bonds

Social impact bonds (SIB) are utilized through performance-based contracting in social sectors, where the government pays for the project financing only if predetermined goals are reached. There are four main with SIB: nonprofits, or service providers, are responsible for offering services to the communities; investors finance the project and expect to be repaid by the government with a rate of return at the end of the project; governments pay back the investors if the predetermined performance criteria are achieved; and finally intermediaries are responsible for the facilitation of the process and also may serve as an independent evaluator of the results. The evaluation process is the basis of SIBs. Defining the evaluation metrics and assigning targets to these metrics directly determines the success of a project.

Although SIBs are acclaimed to be innovative solutions that can potentially address high cost social problems while removing the burden of financing and the risk from government to private investors, real world applications are limited. The first SIB in the world (UK, 2010) was established with the goal of reducing recidivism among male offenders in Peterborough Prison by 7.5%. 17 investors raised £5 million for the 6-year project. Since the results will be evaluated at the end of 2016, it is too early to tell whether the goal of 7.5% reduction will be achieved. However, early official results indicate a possible success. Following the UK, the US started experimenting with SIBs. The pilot projects started in 2011, and last year, in 2014, the largest SIB in the US was financed with a total of $21.3 million in the Massachusetts Juvenile Justice Pay for Success Initiative. Goldman Sachs became the main sponsor of the project by investing $9 million. Although the official results of this investment vehicle are yet to be seen, SIBs can be potential tools to finance huge social problems, as long as the players do not sacrifice addressing the root causes of complex problems by favoring a few short-term performance metrics.

Enterprise Philanthropy

Enterprise philanthropy, also known as venture philanthropy, performance philanthropy, or high-engagement grant making (Fahmy, 2004), “applies the principles and tools of venture capital to the social sector” (Day, 2015). This type of investment strategy targets funds towards early stage for-profit and nonprofit organizations well suited to make a significant social impact. Venture philanthropy can be made across asset classes and recoup varying rates of return; however, many investments simply add more accountability to the traditional grant making process and do not achieve any return on the principal. This type of investment is catalytic, viable across sectors and very transparent to investors. However, it can also be risky, and limited data has made its overarching success unclear.

There are five key elements to successful enterprise philanthropy: 1) a long-term plan (three to six years); 2) a managing partner relationship; 3) accountability for results; 4) provision of cash and expertise; and 5) a well-crafted exit strategy (Center for Venture Philanthropy, 2014). The defining features of venture philanthropy are the managing partner relationship, the accountability for results and the provision of financial and nonfinancial resources. Investors and fund managers remain intimately involved with the investee for the duration of the investment. Because the investment is contingent upon reaching concrete goals, they also typically receive quarterly updates on the organization’s progress. Finally, investors and fund managers provide nonfinancial resources, often in the form of consulting resources, which help the investee implement successful management practices.

Hybrid Models

Created through classic non-profit and for-profit structures, hybrid organizations function as integrated models that create deep social impact and revenue, aligning social benefit and profitability. They achieve social goals through their business practices and extend into various sectors, such as career development, the food industry, healthcare, and technology. Hybrid models offer a bold, sustainable infusion of humanitarian principles into modern capitalism (Battilana et al. 2012) and should be led by individuals who can strategize, analyze, and operate a business while remaining devoted to a social cause. There are two forms of hybrid organizations: a Low-Profit Limited Liability Company (L3C) in the United States and Community Interest Companies in the United Kingdom.

The advantages of hybrid models are that they retain the integrity of the explicitly business and nonprofit worlds, can protect the non-profit status of an organization, and they offer flexibility and adaptability to change (Furr et al. 2014). Hybrid models encourage investors to engage in impact investing and collaborate with other investors. The versatility of the model attracts different types of investors on both the for-profit and the non-profit side. Hybrid models can grow out of either a for-profit or a non-profit, thereby making it an accessible and versatile impact investment tool.  However, special care must be taken to ensure for-profit funds go to non-profit efforts, and additional overhead may be required for both branches of the organization to thrive. Navigating the different forms of funding for hybrid models – and the difficulty of rigidly and completely defining hybrid models – can be intimidating for grant makers unfamiliar with the process (Muller, 2015). Finally, limited research on hybrid models may discourage traditional funders who seek low-risk investments from entering this investment space (Dichter et al, 2014).

Impact investing represents an exciting form of innovation within the philanthropic sphere, and the many different vehicles of impact investing make it accessible to various types of funders and philanthropists. Although its newness can seem intimidating to prospective investors, the potential for addressing social issues through collaboration and effective use of donor dollars renders impact investing an innovation worth exploring.

Gateway Center for Giving Corporate Roundtable: June 3, 2015

June 5, 2015

Engaging Veterans:  This week the Gateway Center for Giving Corporate Roundtable featured FullSizeRender (2)“Engaging Veterans: Philanthropy and Employment Practices,” an online program offered by the Boston College Center for Corporate Citizenship (BCCCC).

The BCCCC webinar focused on the ways that companies are using the valuable skills and experience of military veterans, both through their philanthropy initiatives and employment efforts.

Participants heard from Robin Boggs, US Corporate Citizenship lead at Accenture and Maggie Pollard, Manager at Accenture, who discussed Operation: Employment, their overall effort to support veterans through external efforts (e.g. build capacity of NPO partners, engage Accenture’s employees in veterans’ initiatives in their local communities) and internal efforts (e.g. recruit, retain, and engage military and veterans as employees). The Accenture representatives provided highlights on their own targeted tools that help them to employ veterans, from military career coaching to online digital and technology skills training. Accenture partners with local, national and flagship organizations, which they say is the key to their success in building out their veterans’ employment practice.  By 2020, Accenture has committed to hire 5000 veterans.

Next, Paul Weigel, Directory of Community Affairs at Outerwall (which is the parent company for Coinstar, Redbox and ecoATM; with 66,500 kiosks worldwide), discussed the company’s efforts in this space.  Outerwall uses internal business resource groups, such as “Armed Forces & Allies,” to support organizational initiatives that engage veterans and to drive the corporate behavior which attracts new employees. The corporation also utilizes tools like a micro-site for veterans to conduct job searches that match civilian job codes with military job codes.  Additionally, Outerwall participates in job fairs targeting transitioning veterans and partners with veterans groups that assist in skill set development and foster community involvement, giving leaders within the company the opportunity to coach and mentor veterans..

Both companies recommend looking for opportunities that align with your own business operations, and encourage organizations to think broadly about intersections that exist in the space in order to have holistic impact in the internal and external communities. Many good national partners are out there; employees can tell you what is important to them, so encourage that feedback.

Local funders: A number of Gateway Center for Giving members are currently funding a range of initiatives focused on engaging veterans, including Enterprise Holdings, Boeing, Express Scripts, Maritz, Ameren, and the Greater Saint Louis Community Foundation.

Funder Strategies: Updates & Information A ‘Meet the Donor’ Program

April 30, 2015

Nonprofits, Community Members, and Grantmakers: Join the Gateway Center for Giving to hear from a panel of local funders describing updates they have made to their funding strategies in order to support increased impact in our community.

Featured grantmakers will include:

  • The Boeing Company
  • Deaconess Foundation
  • Mid-America Transplant Services / Donate Life Foundation
  • Nestle Purina
  • St. Louis County Children’s Service Fund

As at all Meet the Donor programs, it is important to note that we follow a Good Guest, Good Host policy, in which attendees are asked to refrain from making fundraising requests during, and immediately before and after the program.

When:  May 27, 3:00-5:00pm
Where:  The Missouri History Museum, Des Lee Auditorium
Open to:  Center Member Grantmakers, NonMember Grantmakers, Nonprofits, Community Members

Register for this program by clicking here!


  • General Admission (Nonprofits, Grantmakers, Community Members): $20.00
  • AFP Members: $15.00

Thank you to Wells Fargo Advisors and AFP for supporting this program. Special thanks to the Missouri History Museum for hosting.

Please contact Clare Brewka at with questions about this program.

New Grant Reporting Tool Helps Funders Assess Effectiveness

March 25, 2015

The Gateway Center for Giving is pleased to announce the launch of a new Grant Reporting Tool, consisting of general tips and a menu of core questions that are considered best practices in effective grant reporting.  The Grant Reporting Tool and accompanying resources are available on the Gateway Center for Giving website, Read the rest of this entry »

Gateway Center President & CEO Highlights Philanthropy in DC

March 20, 2015

Gateway Center President & CEO, Deb Dubin, traveled to Washington DC for the past week to highlight the positive impacts of philanthropy.

Philanthropy creates thriving communities: I spent several days this week for Foundations on the Hill (FOTH), the centerpiece event during Philanthropy Week in Washington. FOTH is hosted by the Forum of Regional Associations of Grantmakers, in partnership with the Council on Foundations.

This year, more than 190 foundation leaders and regional associations from 31 states and the District of Columbia met with their members of Congress to highlight the role and impact of philanthropy.

During my visit, I had the opportunity to meet directly with Missouri leaders including Congressman Lacy Clay and his staff, Senator Roy Blunt and his staff, and tax counsel to Senator Claire McCaskill.

Read the rest of this entry »

Gateway Center for Giving Celebrates the Strength of Philanthropy in St. Louis

January 30, 2015

St. Louis, January 30, 2015—The Gateway Center for Giving convened 165 grantmakers and nonprofits at the Gateway Center’s Annual Meeting today to celebrate the generosity of donors in the St. Louis region and recognize four award winners for their grantmaking excellence and impact. Gateway Center members collectively represent more than $3.8 billion in charitable assets, of which more than $274 million are deployed in the St. Louis region each year.  Read the rest of this entry »

2014 Philanthropic Landscape: Local Charities Report Good Times Returning

July 18, 2014

“Diving Into Data: 
What, Why and How to Use It for Success”

Sponsored by The Rome Group,
 with the Greater St. Louis Community Foundation 
and the Gateway Center for Giving

ST. LOUIS, July 17, 2014 –  Nearly three of every four nonprofits in a recent survey of St. Louis area organizations reported meeting their fundraising goals in 2013, with two-thirds saying they raised more money last year than in 2012. The percentages are the highest reported since 2007, before the recession. Further, they reflect a national uptick in charitable giving, as reported in the latest Giving USA report, which noted total giving in the U.S. in 2013 was $335.17 billion, up 4.4 percent from 2012, or 2.7 percent after adjusting for inflation. In a further sign of optimism, 59 percent of local nonprofits believe they will raise even more money in 2014. The results are part of annual surveys of area nonprofits and local institutional and individual grantmakers, conducted by The Rome Group, a local consulting firm, in partnership with the Gateway Center for Giving and the Greater St. Louis Community Foundation. A total of 216 nonprofits and 95 grantmakers of all sizes completed the surveys. The results of the surveys were to be presented to an audience of almost 500 attendees at The Rome Group’s annual Philanthropic Landscape event on July 17 at Washington University’s Edison Theater. “Despite the hardships during the recent recession, charitable giving, both locally and nationally, continues to grow steadily,” said Amy Rome, principal and founder of The Rome Group. “In fact, total giving adjusted for inflation is up 150 percent over the past 40 years. Our latest survey demonstrates that philanthropy is benefitting from a stronger economy, and that’s good for all of us.”

Among the institutional grantmakers (primarily corporate and private foundations) surveyed, 83 percent reported they funded the same number or more organizations in 2013 than in 2012, and 92  percent expect their 2014 dollar contributions to be as high or higher. Ninety-three percent of  individual donors (including family foundations and donor advised funds) funded at least as many  organizations in 2013, and 70 percent will give as much or more this year. A majority of both groups is also now open to accepting grant proposals from previously unfunded organizations.

“These are the strongest numbers we’ve seen since the recession of 2008,” said Amelia Bond, president and CEO of the Community Foundation. “We are seeing a return to optimism among funders of all types,” added Deb Dubin, president and CEO of the Gateway Center. “Virtually every sub-sector is benefitting from the resurgence in philanthropic activity.”

According to the surveys, the biggest challenge facing nonprofits in 2014 continues to be meeting demand for services with current staffing levels. Cutbacks in staff and other resources during the recession are still impacting many nonprofits,” explained Rome. Nonprofits also expressed concern about the need to provide better data and measurements on program impact. That prompted the theme of this year’s Philanthropic Landscape event: Diving into Data.

“There is a growing interest in the use of data,” noted Rome. “Funders are asking for it. Board members expect it. Individual donors want proof their gifts are having an impact. The important thing, however, is for organizations to find ways to use data not only to satisfy their stakeholders, but also to measure effectiveness and efficiency, along with results and impact. “The challenge,” she added, “is that nonprofits often do not have adequate time, staffing or training to analyze and translate data to use for decision-making.” While 87 percent of survey respondents reported collecting data of all types, “many of them admit they are not really using it effectively to make program improvements or to raise more money.”

The grantmakers survey reported similar findings. “Most of the nonprofits our donors support do a good job of collecting data on the need for their programs and services,” said Bond. “But there is a gap in understanding as to whether or not nonprofits are using this data to improve their programs.” Dubin added that a majority of funders who responded to the survey appear to have doubts that nonprofits have the necessary staff, skills or technology to do effective data management. “Unfortunately, respondents told us they are either unwilling or unsure about supporting a specific request to fund data collection and analysis. That shows us that nonprofits can do a better job of selling the need for data and proving its long-term value.”

The Philanthropic Landscape event featured a keynote presentation on this topic by Carolyn Roby, senior vice president with Wells Fargo Foundation in Minnesota.  Four local philanthropic leaders then joined her in a panel discussion, including:

• Charles Gasper, director of evaluation for the Nine Network;

• Rhonda Gray, executive director of Almost Home;

• Melinda McAliney, program director for Lutheran Foundation of St. Louis; and

• Kristine Ramsey, senior vice president of development at Wyman Center.

The results of The Rome Group’s surveys can be viewed at, and click here to access a list of data resources.


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