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!
Filed under: charity, conflict of interest, corporate "giving", equality, Fundraising, NGOs, nonprofit, not for profit, philanthropy, poverty, social enterprise/social impact
Tags: 501c3, charity, Chicago, fundraising, inequality, NFP, nonprofit, Nonprofiteer, not for profit, philanthropy, poverty, social entrepreneurship
