Social Investment: What’s all the Hype and How do I Make it Work for My Organization?
Social Investors outpaced donors for the first time last year. In this paradigm shift, nonprofits should be exploring how social investment fits into advancing their missions and evaluating the best long-term options for their organization. With the continuing challenge of doing more with less, attracting different types of support is critical to success and sustainability.
Social investments are an investment of funds that are intended to deliver a positive social impact, as well as a return on the original investment and is accessible to charities for their social impact objectives. Social investment vehicles can take many forms, but what they all have in common is the combination of different stakeholders supporting projects in their own unique way with a common goal. Among the critical components for any social investment vehicle is data around outcomes and programmatic efficacy.
No matter what your organization does, if it makes an impact, a social investment vehicle used as part of an overall philanthropic strategy can help nonproﬁts to raise signiﬁcant funding for capital projects or programmatic support.
Social impact investments oﬀer an advantage for nonproﬁts who often face the challenge of raising capital to support new initiatives and achieve greater impact for society on a long-term basis. Social investment vehicles can minimize the challenges of traditional fundraising like:
Lack of access to capital
The length of time needed to raise capital funds through traditional means, (typically three to ﬁve years)
Scalability without adequate funding and resources
The two major types of social investment vehicles are Social Impact Funds and Social Investment Bonds. The most advantageous vehicle depends upon the nonprofit’s specific funding need or project, its resource development infrastructure, its history tracking and evaluating outcomes, and the ability to show evidence for successful outcomes.
Social Impact Funds
Social Impact Funds are developed and marketed to attract individual investors who are interested in making an investment to create positive and measurable social impact in return for a financial return. The rate of return is structured into the fund and this type of vehicle is ideal for well-established organizations with name recognition and nonprofits whose missions resonate with social impact investors.
Social Investment Bonds
Social Impact Bonds (SIBS) oﬀer more expedient access to capital for nonproﬁts conﬁdent in the outcomes of their project and willing to contract with public and private investors based on those successful outcomes. The SIB partnership is typically comprised of the nonprofit; the issuer of the bonds, which can be municipal or state governments; community foundations or private entities; capital investors, and an independent evaluator to structure measurable financial and programmatic outcomes over the span of the bond term. This type of vehicle can benefit social and human service organizations whose missions are attractive to government, foundation, and private investors.
How Our Strategic Partnership Helps Navigate the Process
The Jeffrey Sobel Consulting (JSC) and the Professional Outsourced Philanthropic Solutions (POPS) team at Drinker Biddle & Reath (DBR) strategic partnership will help you navigate the social investment vehicle process. The partnership draws on DBR’s legal expertise and their Professional Outsourced Philanthropic Solutions (POPS) team, which enables nonprofits and other social impact-oriented organizations to solve their most critical strategic, administrative, and development challenges, together with JSC’s 10+ years of experience in nonprofit strategic planning and fundraising.
As consultants, we will create the structure and manage the process by performing a feasibility study and determining the project’s viability; evaluate the structure and appropriate institutions; develop the fundraising tools and techniques; and document and measure the progress and results.