A Return on Social Investment

For decades, nonprofits looked to donors – private foundations, individual philanthropists, governments – for most of their expenses. Some suggest that some nonprofits are stuck on “the philanthropy dole.”

An Aspen leadership fellow observed, “There’s been literally trillions and trillions of dollars given through nonprofits, with limited results.” As a businessman turning toward social change ventures, that nonprofit model baffles him. “If you give me money, I produce results,” he said of his primary field. “If I don’t produce results, I don’t get more money.”

Enter the world of social-impact investing, or socially responsible investing. In this world, investors are willing to trade some – or perhaps all – of their possible return on investment (ROI) for achieving some social change, or “social return.”

But that begs another question: What’s the ideal 'Return on Investment' on charity?

And how do you measure it? Donors have become increasingly demanding of data to help evaluate how well donor dollars are being used. As one guy in the trenches observed, “Anecdotes are not going to cut it anymore.”

At the same time, not every change can be turned into a number, much less a return on investment. One woman who runs a nonprofit abroad asked, “How do we get measure right? Our ‘profit’ is, we’re changing lives somehow.”

Making that change happen, she insists, requires that “the helper” – donor or investor – “needs to listen to the doer.”

[Christian Science Monitor]

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