Impact Investing Is No Substitute for Philanthropy

Impact Investing Is No Substitute for Philanthropy

This letter to the Sun-Times by Phillip Jackson, Founder and Executive Director of Chicago's Black Star Project, ably summarizes everything that's wrong with the recent announcement by the MacArthur Foundation, the Chicago Community Trust and the Calvert Foundation that they plan to join forces to lend money to nonprofits, a behavior they style "impact investing." Impact investing has been shown ineffective in virtually every context in which it has been tried, and under every name by which it goes, whether "pay for success," "social impact bonds," "social enterprise," "philanthro-capitalism," or any of the other monikers designed to suggest that rich people can help poor people without actually, you know, giving anything.

If impact investing replaced other types of investing---in weapons manufacturing, say, or tobacco---it would be harmless, if not necessarily useful.  (Some economists doubt divestment makes any difference to the stock price of the companies shunned.)  But when impact investing is designed to replace actual grants, that's when we have a real problem.

And just as bad money is said to drive out good, impact investing inevitably drives out grants.  People only invest when they expect to get a return, which means they only invest in programs with a proven track record, which means they're investing in things they previously would have paid for 100%. So "impact investing" reduces grant-making, stifles innovation and makes rich people richer all at the same time---a triple threat!

 

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    The Nonprofiteer is Kelly Kleiman, principal of NFP Consulting, which provides Board development, strategic planning and fund-raising services to charities and philanthropies. Through her consulting practice and in her guise as The Nonprofiteer, Kelly has spent the past 25-plus years helping small and mid-sized nonprofits organize themselves better and raise more money. These days she focuses especially on helping them use high-skill volunteers. Kelly is also a lawyer and freelance journalist whose reportage and essays have appeared in the New York Times, Wall Street Journal, Washington Post, Christian Science Monitor and other dailies; in magazines including In These Times and Chicago Philanthropy; in the alternative press; on websites including the Huffington Post; and on the radio, including the BBC and WBEZ Chicago Public Radio. She and her fellow "Dueling Critic" Jonathan Abarbanel present a weekly podcast of their reviews of Chicago theater at DuelingCritics.net. Earlier in her career she was dean of admissions of IIT Chicago-Kent College of Law and Executive Director of the Chicago Children’s Choir, and practiced real estate and zoning law with the firm of Rudnick & Wolfe. Kelly holds undergraduate and law degrees from the University of Chicago. She was a founding Board member of the Association of Consultants to Nonprofits and also served for 5 years on the Board of the Association for Women Journalists–Chicago. She can be reached ("Dear Nonprofiteer . . .") at KellyNFP@yahoo.com.

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