Negative Returns: The Impact of Impact Investing on Empowerment and Advocacy

Jeffrey BerryBy Jeffrey M. Berry (Tufts University)

An emerging trend in philanthropy is impact investing, a strategy in which foundations replace traditional grants with “investments.” The underlying reasoning is that the impact of a foundation’s money will be maximized by enabling nonprofits to grow and expand their services on an ongoing basis. A second approach focuses on investments that enhance nonprofits’ internal capacities which, in turn, will make them more effective moving forward. These are worthy goals and, if achieved, would constitute an impressive advance in philanthropy. However, there’s also reason for skepticism. The research conducted for this paper points to two broad concerns. One is that outcomes can be exaggerated by the lack of appropriate metrics and the absence of rigorous measurement. Claims of expanded impact must be judged cautiously. Second, and more problematic, is that impact investing fits poorly with support for advocacy by nonprofits. In the United States nonprofits are the principal institutions who speak on behalf of the disadvantaged. Yet capacity building investments systematically ignore the need to build up the ability of nonprofits to conduct advocacy. Advocacy may be viewed as a unwise investment as such political work is long-term, has uncertain results, and defies measurement of any actor’s discrete impact.

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PS: Political Science & Politics / Volume 49 / Issue 03 / July 2016, pp 437-441 / Copyright © American Political Science Association 2016