Philadelphia Social Innovations Journal: Philanthropy, Social Enterprise & Impact Investing Edition
Updated: Oct 14, 2021
The Philanthropy Column When talking about the philanthropy landscape in Philadelphia, someone recently asked me whether there was anything truly innovative going on here in our city. B Lab, GoodCompany Ventures, Wharton’s Program for Social Impact, The Center for High Impact Philanthropy, William Penn Foundation, JOIN, PlayWorks and many other high-performing nonprofit organizations and foundations came to mind as I thought about the question.
There are over 7,000 nonprofits functioning in our region today. These organizations provide healthcare, education, creative arts, social services—and focus on a myriad of other issue areas. Some organizations are performing better than others in impact terms and quality. And some would argue that there are just too many organizations and not enough funding or leadership to go around. Every dollar donated, whether coming from an individual, an institution or the government, is a vote of confidence in the work of that organization. Every dollar needs to go to an organization with strong leadership, an organization that is mission-driven and outcomes oriented, and an organization that is changing the game.
Infrastructure needs continued investment to incubate good people with good ideas and to match those people with appropriate funding. Several individuals and foundations are changing the way they put their capital to work in support of values and mission—shifting gears towards innovation and impact. Problems do not get solved with just philanthropic capital, though. Public and private sector investment is also required.
I have been part of this edition of the Philadelphia Social Innovations Journal, curating articles that highlight the innovations happening in our city in this space of philanthropy and social enterprise. And, to answer that question quite simply, yes, there are many innovative ideas, people, organizations and collaborations, which are taking advantage of and leveraging the long history of philanthropy in Philadelphia.
Going through the process of working with the many writer contributors to this edition of the Journal, three themes clearly emerged.
There is a need to educate those with capital to move beyond just thinking about the required payout or a philanthropic grant, to also think about their investments as a way for them to increase their impact and complement their grantmaking. There is a need to provide support to individuals—those social entrepreneurs—with good ideas. Support means incubating ideas and turning the good ideas into businesses focused on impact. There is also a need to support executive directors at traditional nonprofit organizations as they rethink their business models to ease the constant burden of raising philanthropic capital. There is a need to make continued investments in the infrastructure to better link those with capital to those organizations, whether nonprofit or for-profit, focused on impact.
1. Educate Those With Capital To Move Beyond Traditional Grants. Watershed Capital and Delaware Valley Grantmakers hosted a sold-out, waiting list event in Philadelphia this past spring called Sustainable Opportunities and Education (SOE), focusing on presenting real opportunities and educating Philadelphia foundations on the impact investing space. It garnered a lot of interest on the part of funders to understand the space of impact investing a bit better.
Sitting at that meeting I thought to myself, what are these foundation trustees going to do with this information? Are they going to act? Are they going to change the way they go about putting their capital to work? How will they take what they’ve learned and talk about it with their fellow trustees or even their investment management firms and program staff?
The term impact investing has been embraced by a set of investors who have aspirations to integrate their investments and philanthropy. Investing for financial return and giving for charitable return have historically been separate activities. But given the downturn in the economy, shrunken assets and the efforts of early adopters, those with fiduciary responsibility are increasingly exploring ways to align investment strategy and implementation with the mission and values of their foundations.
Impact investing requires foundations to change how they do business. The acts of investing and giving are being viewed as interrelated and as such a new framework and a new equilibrium are needed. This includes education to get board members up to speed on the opportunity; a framework to guide decision-making; a selection or discovery process to evaluate opportunities along the impact investing continuum; and tools to measure the blended value generated by these opportunities. These elements need to be incorporated into oversight best practices.
All of this has influenced what one would historically call traditional philanthropy. Some organizations are allocating a portion of their resources in this direction, like William Penn Foundation. And some are moving towards allocating one hundred percent in this direction.
We are seeing signs that leadership in some of Philadelphia’s nonprofits are taking notice of the above and are changing the way they think about their business model. They are asking themselves how they can better compete and whether there is a sustainable component to their revenue stream. If nonprofit leaders don’t have the answers to these questions then some are figuring out ways to engage funders to help them think about their business in a different way. Chuck Levesque at Depaul USA is a great example of a nonprofit executive director thinking this way. Chuck contributed an article to this edition of the Journal, which talks about what his organization has done to develop a revenue stream with the support of the Patricia Kind Foundation.
Many nonprofit leaders are also rethinking the way they capture and talk about impact. There is a movement to be more outcomes oriented versus outputs oriented. And that move towards outcomes is not just reserved for the doers; the donors are also thinking this way and Debra Kahn, the Executive Director of Delaware Valley Grantmakers wrote a thoughtful piece for the Journal about funders and impact.
However, the relationship between both social entrepreneurs and leaders of nonprofits and those with capital to invest remains at arms’ length. Those with the ideas would say that it is difficult to link up with funders/investors. Those with capital would say that it is difficult to find vetted opportunities for investment. Funders in Philadelphia have a real opportunity to push the agenda forward in our city as it relates to investing for impact. They just need the education and continued infrastructure investment to help them get there.
2. Support Individuals with Good Ideas. Social entrepreneurship has become a global phenomenon, especially among MBA students. Wharton’s Program for Social Impact is a great example of how major universities are integrating social enterprise into the curriculum. Wharton has also partnered with The Center for High Impact Philanthropy, which has developed a research-based process aimed at enabling the flow of philanthropic capital to where it can do the most good. I wrote another article in this edition of the Journal profiling The Center. We are also seeing more and more individuals with bright ideas participate in business plan competitions and incubators like GoodCompany Ventures, based here in Philadelphia.
The Sustainable Business Network is another great example of an organization supporting those with good ideas by educating and growing a broad base of local, independent businesses and educating policymakers and the public to build a thriving economy in the Greater Philadelphia region.
GreenLight Fund, which takes a venture capital approach to philanthropy, set up shop in Philadelphia earlier this year. While some local nonprofits have commented about their approach—bringing in high-performing national nonprofit organizations to address issues important to a city and supporting them as they establish themselves in the new city—GreenLight applies its process to Philadelphia in how to address specific issues that people struggle to figure out. They fully support these organizations by providing not only capital, but also needed resources to help their local executives get started.
Several national nonprofit organizations like Playworks, Spark and YouthBuild have chosen to come to Philadelphia to set-up shop on their own. These high-performing organizations, started by inspiring individuals, have each selected Philadelphia as a place for continued expansion. Jill Vialet and Marjorie Nightingale, from Playworks, wrote a great piece for the Journal on what it has been like to scale their organization and come to Philadelphia.
3. Make Continued Investments in Infrastructure. B Lab, based in Philadelphia, continues to grow and push forward its agenda for states to recognize Benefit Corporations (B Corps). By definition, B Corps are a new type of corporation, which uses the power of business to solve social and environmental problems. According to the organization’s website, at the time of this edition’s publication, there are now more than 600 B Corps representing over $4 billion in revenues and 60 industries (B Lab n.d.).
The Global Impact Investing Network (GIIN) continues to expand its Impact Base, a database of impact investment funds and products. IRIS (Impact Reporting and Investment Standards) continues to evolve, providing a framework for metrics to help organizations assess and report on their social performance. More for Mission and PRI Makers announced their merger to form Mission Investors Exchange in May of 2012. The Exchange is 200 members strong and includes foundations and mission investing organizations who use or are learning to use program-related and mission-related investing as a strategy to accomplish their philanthropic goals. And the U.S. Treasury Department has recently issued a proposal to provide guidance to private foundations on program-related investments through 9 examples.
Investors’ Circle Philadelphia is comprised of smart and thoughtful leaders pooling their capital in support of opportunities focused on triple bottom line. The globalislocal Fund is a Philadelphia-based partnership fund that addresses global poverty by making investments—loans and grants—in organizations that meet specific criteria. RSF Finance and Center For The Greater Good, both increasing their presence in the Greater Philadelphia area, are two funds that aim to change the way people think about putting their capital to work in support of mission.
Broadly speaking, mainstream investment management firms have not embraced this approach to investing. Some family offices, a handful of private wealth managers and other advisors have embraced the principles of impact investing. All of this is real innovation in philanthropy and something to keep an eye on as the infrastructure continues to grow.
Closing A growing number of individuals, families, foundations and pensions believe that the assets set aside for investment should be invested in such a way that supports and complements their philanthropic work or values. There are organizations and companies in the field who are taking steps to add some infrastructure so that this investment opportunity can be more readily consumed.
There is also a population of people in this space that thinks all of this is just too complicated and outside what they believe to be philanthropy. These individuals say, just get out there, talk to people and don’t overthink or put too much pressure on the grantee organization to produce metrics and extensive outcomes-oriented reporting. They caution nonprofit leaders and social entrepreneurs from looking starry eyed at the business approach to solving social problems. They believe that there is the risk that the value provided could be diminished by the profit motive. I am not saying that one is right over the other, but I am saying that innovation in the field of philanthropy is coming from this evolving approach of investing for impact.
References B Lab. (n.d.). Accessed October 15, 2012, http://www.bcorporation.net/.