Key Points

Grantmaking traditionally has been at the heart of philanthropy, whereas impact was the exclusive expectation of any desired result. While there is still a place for this kind of pure push for change, many investors today expect more, leveraging the power of the markets to invest in a way that is both impactful and able to maximize their financial rewards. This is particularly true of foundations with an eye toward supporting the perpetuity of their missions and organizations.

This approach also offers a range of innovative mission-based benefits, including extending the utility of philanthropic capital and generating more capital to reinvest into impact initiatives, potentially in partnership or in tandem with grantmaking. However, the focus of impact has also shifted in radical new ways, especially over the last few years, in response to social developments and generational shifts in value. These shifts call for greater intentionality in defining the nuance and complexities involved in any use of the term “impact.”

This article argues the key importance of defining and crystalizing specific thresholds, metrics, and language around foundations’ missions to ensure demonstrable qualitative and quantitative measures of progress toward success (financially and impact-based); discusses how the long-term pursuit of values-based goals and financial performance are mutually inclusive and self-reinforcing, and can be combined to great effect with more traditional forms of philanthropy (i.e., grantmaking); and demonstrates how impact investing provides the opportunity for the engagement of additional stakeholders and members of the community.

This article also addresses several key questions: How has the use of philanthropic capital evolved from an investment perspective? What does an effective impact definition include? In which ways do impact and financial priorities buoy each other? How does one find credible sources of ESG/impact data and what determines high-quality data? And, finally, how can organizations best articulate their missions in their investment policy statements to better define their double bottom line?

Open Access