This is post is part of an ongoing impact investing series on RE: Philanthropy.
In recent years, I have championed the potential of impact investing to unlock new forms and sources of capital for the social sector. But financial capital is just one piece of the puzzle. Through my work at the Rockefeller Foundation and more recently at Nonprofit Finance Fund (NFF), I have come to see that no single organization, idea, or type of capital is a cure-all for social issues.
Future success will be predicated on combining all of the resources willing and able to tackle social woes. This will bring together unlikely partners, approaches, and sources of money that share the common goal of a more just and vibrant world.
I am excited to share an excerpt from a brief piece published recently in the Stanford Social Innovation Review (SSIR), which describes the concept of Complete Capital, Nonprofit Finance Fund’s integrated approach to addressing social problems. Here at NFF, we are working with foundations, government, and other partners to address social challenges using our Complete Capital framework. The article describes some of the inspiration for Complete Capital and makes the case for bringing it to a large enough scale to make measurable and consequential improvements in the world.
Although we all would like to avoid more stories of economic doom and gloom, those of us who work with social service agencies and their clients are witnessing a sector in crisis. In the United States, the withdrawal of federal stimulus funding is echoing through the social spending system, shrinking budgets as needs grow. Demand for services rose 20 percent again last year, while for many essential organizations government funding failed to meet demand and private funding failed to fill the gap, according to a 2012 state of the sector survey from Nonprofit Finance Fund (NFF). A similar story is playing out around the globe. We cannot afford to hunker down and wait for economic relief that may be many years away.
So what are we going to do? As the co-author of the recent book Impact Investing and the CEO of an organization (NFF) that has been lending to nonprofits for 32 years, I certainly believe that tapping into the resources and expertise of for-profit investment is part of the answer. The rise of the impact investment movement is poised to unlock substantial new capital for social purpose. Innovative nonprofits are already rethinking the way they do business and are going to heroic lengths to extract maximum impact from every dollar. And increasingly, we have the data and knowledge we need to tackle social ills.
But the ultimate contribution of impact investing, and similar innovations, will not come in the form of interesting investments or channeling grant money more efficiently. Instead, it will come by addressing two fundamental challenges of our moment: How will developed countries sustain a safety net in the wake of macroeconomic and demographic pressures? And how will developing countries ensure that economic growth is more equitably shared?
To answer those questions requires us to reframe how we work….Over 32 years of making Impact Investments and advising thousands of organizations through our advisory work, we have come to see the broad set of perspectives and capabilities required to address complex social challenges. We believe that effective approaches will mobilize four types of capital:
Financial capital that both pays for expanded project delivery (such as new ambulances or shelter beds) and builds healthy and sustainable organizations. The combination of grants and investments will differ for each intervention, but the Complete Capital approach will bring sufficient resources to sustain operations, change business models, and facilitate growth.
Intellectual capital that draws on rapidly expanding evidence about what works and what does not at the business model and systems level.
Human capital that translates bold ideas into action. More than just a capable management team and board, human capital is the leadership ecosystem of outside advisors, volunteers, and clients that organizations need to thrive in challenging environments.
Social capital that enables people and organizations unused to working together to collaborate effectively. We will need to reposition government, private funders, organization leaders, and their clients in new relationships. Trust and creativity will be essential for social capital formation, supporting and pushing us to confront our collective challenges and embrace innovative solutions…..
To read the full article, visit SSIR here.
Antony Bugg-Levine is CEO of Nonprofit Finance Fund.