Measuring the Impact of Impact Investing - Wealth Matters

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The New York Times
Saturday, September 29, 2012

Measuring the Impact of Impact Investing - Wealth Matters

By PAUL SULLIVAN

ALL philanthropists want their donations to mean something, be it for a new wing for a hospital or to finance a program aimed at doing social good. Increasingly, though, philanthropists are looking for a way to measure the impact of their dollars.

There is certainly a lot of interest in impact investing — essentially investing money in an organization, either profit-making or nonprofit, with the expectation that it will generate a social benefit and perhaps a financial return. But people who embrace impact investing as the future of serious philanthropy often seem to me like scolds. Shouldn’t people be able to give away their money however they want?

Sure, you get a tax break for making a charitable donation, and some advisers to philanthropists argue this means you have a responsibility to give your money away wisely. The same could hold true for people making smaller donations.

Still, I had an interest in understanding impact investing better and was eager to sit down with Matt Bannick, managing partner of the Omidyar Network, an organization started by the founder of eBay that makes grants and investments in groups focused on economic and social change.

Mr. Bannick’s visit to New York coincided with the Clinton Global Initiative, an annual conference that has gained a reputation for encouraging people to make and fulfill bold promises about social change. Mr. Bannick and Paula Goldman, a director at the Omidyar Network, wanted to talk about a series of blog posts on the future of impact investing that they have written for the Stanford Social Innovation Review.

Their posts argue that impact investors should focus less on individual enterprises and more on entire sectors, like education or mobile technologies. It is a lofty idea, and I wanted to know how it could really be done.

Mr. Bannick pointed to Bridge International Academies, a Kenyan group that has created a “school in a box” that can be set up inexpensively in poor areas. Omidyar invested $1.8 million in 2009, and the group has built 83 schools, each of which cost less than $40,000 to build. Each one educates 343 students on average at a tuition of $4 a month.

“Education is generally where there should be sector-level change,” he said. “Bridge can scale up and affect millions. The real breakthrough is if others say, ‘How do we bring this to Nepal or Cameroon?’ ”

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