News & Insights
How Philanthropy Plays an Important Role in Impact Investing
If impact investors have investment dollars then why do they still need philanthropic dollars? Good question. Last week, Anthony Bugg-Levine, CEO of Nonprofit Finance Fund (NFF), did a great job at explaining a couple key roles that philanthropy plays in impact investing at his organization. In Bugg-Levine’s interview with Forbes contributor Devin Thorpe, it was shared that:
Investment dollars are not a replacement for philanthropy.
Instead, more social good can be achieved when impact investors find ways to use the two types of capital together in complementary ways.
Bugg-Levine gave an example from NFF’s work. He explained how NFF was able to provide a loan to a health center that serves poor, immigrant communities, precisely because of a cross-sector partnership that combined investment and philanthropic dollars. The health center needed a loan to expand its facility. It would have been able to repay a portion of the loan with revenue from services it provides, but not all. So NFF worked with the federal government to subsidize the cost of construction. It also secured philanthropic capital from private foundations to mitigate the risk involved with the loan, which subsequently helped attract investment capital. In other words, philanthropy catalyzed NFF’s impact investment. It would have been far more difficult for a single member of this coalition to fund the project alone with just one type of capital. Or, as Bugg-Levine said, “Impact investing is a tool to unlock for-profit capital that will complement philanthropic capital and government support to capitalize the solutions we all want to see in our society.”
Why it matters
Similarly, Global Partnerships also uses philanthropic dollars to create impact investment deals that would otherwise be very difficult to facilitate. For example, our Chief Investment and Operating Officer, Mark Coffey, recently talked about how philanthropic capital enabled us to make a loan to Fonkoze, a partner that has exceptional social performance but faces many challenges due to its difficult geography (Haiti). So, why does using different types of capital in creative ways matter? It matters because it allows us to reach more people living in poverty. It means that more women and families living in rural areas will now have the opportunity to build healthier and successful lives for themselves. Because at the end of the day, everything we do is to advance our mission of expanding opportunity for people living in poverty.
Click here to watch Anthony Bugg-Levine's full interview.
If you enjoyed this blog post, you might also want to check out:
• Want to read more about impact investing and social enterprise? Check out all of Devin Thorpe’s work on Forbes: http://www.forbes.com/sites/devinthorpe. You can also see the full list of “What We’re Reading” at http://www.globalpartnerships.org/learn-more/news-insights.
• Philanthropy plays a critical role in facilitating early-stage research on viable poverty solutions. Learn more in our newsletter article, Do Donations Matter in Impact Investing?.