Driving Transformational Impact Through Social Investments

Does your social impact portfolio have the right balance of charitable contributions and social investments today? Only you and your organization can answer that as you look to the alignment of your strategy to your broader mission, vision, and values. However, those primarily focused on using a charitable contribution method may want to explore the transformational effect that incorporating social investments could have on your work and your communities, both now and long into the future.

We can start with what seems to be a simple question. How invested are you? A question we often ask ourselves in various contexts: how invested are you in your studies, in your career, in your relationships, in your passion projects, and the list goes on. Often the question forces us to reflect on our feelings of interest, determination, resilience, energy, and devotion. Subsequently, if I asked you how invested you are financially, you might also think about debts, credits, losses, gains, risk, exposure, and opportunities.

Now, if I asked you how invested you are in driving longer-term impact, what would your answer be?  

You could start by doing a simple assessment, cataloguing all the ways you are invested in positive impact today.

• Do you donate to charities, either through individual donations or organizational grants?

• Do you volunteer in your local community, either through employee volunteering programs or on your own?

• Are you engaged in positive social and environmental sustainability activities, either through your business practices or through your actions at home?

Next, you may go one level deeper and reflect on those activities and donations to determine if they are truly focused on longer-term impact. Certainly, all the “give back” activities we are engaged in are focused on solving challenging, often intractable problems. Yet, the question is, are those activities aimed at creating broad systematic changes or are they tackling more immediate needs?

For those of us engaged in CSR and philanthropy, all of this then leads us to the core question: are we invested in addressing the root causes of our larger societal and environmental issues or are we passionately focused on treating the current symptoms through our contributions?  

Defining the Approach

To be clear, both charitable contributions and social investments play a critical role in a balanced portfolio of programs focused on social and environmental impact. That said, each funding type has a different function in a comprehensive strategy. To ground ourselves, let us first look at some definitions:

Contribution: a gift or payment to a common fund or collection, or the part played by a person or thing in bringing about a result or helping something to advance. 

Investment: the action or process of investing money for profit or material results, or an act of devoting time, effort, or energy to a particular undertaking with the expectation of a worthwhile result.

Many Types of Giving & Engagement Support Both a Contributions and Investment Model

Keeping those definitions of contributions and investments in mind, we can look to our types of giving and engagement to pinpoint where we are driving longer-term impact. From a corporate philanthropy perspective, we often think about cash grants, sponsorships, in-kind giving, scholarships, employee assistance funds, and disaster relief, as our main vehicles of funding. All of these can potentially fund long-term impact. Although if we dig deeper, we come back to the original question, are the organizations, programs, and activities we are funding focused on addressing broad systematic changes or are they tackling more immediate needs?

The same is true for our employee engagement programs. We often think of employee giving, matching gifts, incentives, and reward programs, along with employee volunteering, either as a team or as individuals, as ways to impact our local communities and drive impact. Which they are! Yet, many of those activities tend to be point in time contributions and do not necessarily translate to deeper or longer-term sustainable change.

What Makes a Social Investment Approach Different

So, what really makes social investment models different from simply making contributions? It comes down to a distinctive approach, which may encompass alternative forms of giving and engagement, an intentional long-term focus, unique benefits and returns, and often a diverse range of beneficiaries.

Social investment is a multifaceted approach that seeks to harness financial capital, expertise, and innovation to tackle societal problems and create positive change. It is driven by a recognition that traditional philanthropy and government funding alone may not be sufficient to address complex social and environmental challenges, and that innovative financing models can play a vital role in achieving sustainable solutions.

Potential social investment models include:

• Socially Responsible Investing (SRI): Investing for both financial returns and positive social or environmental impact.

• Impact or Mission Investing: Aligning investments with ethical and social values.

• Philanthropic Loans: Providing capital to social impact initiatives with repayment expectations.

• Impact Lending: Including a “layered approach” with grants.

• Funding Innovation Grants: Providing more inclusive funding.

• Supporting Social Entrepreneurs: With wrap around services, beyond grant dollars.

Social Investment in Action

Using the idea of disaster funding as an example, we can explore how a social investment approach might differ from a more traditional charitable contribution approach. Often, when a natural or man–made disaster strikes, we see an immediate response from the CSR and philanthropic community, typically in the form of donations made for critical relief needs. That said, a social investment approach may take the other elements of disaster management and funding into account, including investments in disaster mitigation, preparedness, and recovery. For example, an investment in new sustainability innovations, or new social and environmental enterprises focused on disaster mitigation, provides a more proactive approach and opportunity for longer-term systemic change.

Benefits & Returns of Social Investments vs. Charitable Contributions

Not only do social investments involve different approaches and types of engagement, but the associated benefits and returns can also vary significantly. Social investments are often associated with sustainable impact, innovation, entrepreneurship, capacity building, measurable outcomes (although that is a loaded term in our sector), alignment with values, an ability to adapt to market trends, and often financial returns which can be used to reinvest, sustain, and scale social impact efforts.

Social investment beneficiaries often include a mixture of both those taking action, such as social enterprises, social entrepreneurs, and innovators, as well as those that benefit from systemic, transformative, sustainable change, such as vulnerable or under recognized (marginalized) communities, and children or youth who are most impacted by long-term transformations.

By contrast, charitable contributions, which are also crucially important, are typically associated with benefits and returns such as addressing more immediate needs, strengthening communities, driving engagement, peer inspiration, the progression of social equity, leveraging networks and collaboration, and personal fulfillment, or a sense of connection and purpose.

Consequently, the beneficiaries of charitable contributions often include traditional nonprofit or charitable organizations, community development organizations, service providers and institutions, and global aid and development organizations. All these play a significant role in addressing timely societal issues, promoting social welfare, and making a positive impact that may be either short or long term in focus.

Not Mutually Exclusive, But Complementary

Let’s revisit my question at the beginning in a different way: how are you invested? What is the focus of your investment? If you are currently focused on addressing urgent and pressing needs, responding to humanitarian crisis, natural disaster, conflicts, and emergencies, and if you are measuring more immediate, short-term outputs, then you are likely taking a charitable contributions approach. If you are focused more on tackling the root causes of issues, responding with efforts geared toward prevention and empowerment, leading to the improvement of circumstances independently, and measuring long-term field level data to assess change, all with an eye toward scalability and sustainability, then you are most likely taking a social investments approach.

Finally, for those that are doing both, you are taking the most balanced portfolio approach of them all, by working to provide immediate relief and sustainable impact. Ultimately, this means driving both short-term action that provides rapid assistance for individuals and communities in need, as well as long-term impact that will provide transformational, lasting, positive change that will endure beyond initial intervention.