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A full version of this post originally appeared on the blog Stanford Social Innovation Review. This excerpt has been reprinted with permission.
The explosive growth of the impact investing market has attracted more and more mission-driven nonprofits in recent years, but many of them are jumping in without first assessing if the undertaking is the right fit for their mission, culture or stakeholders. While some nonprofits are achieving their impact goals while making financial returns, many others have wasted years of staff time or thousands of dollars on expensive consultants with little to show for it.
To help nonprofits avoid wasteful forays into impact investing, we created a tool to help them figure out if they should pursue it at all and, should they move forward, how they should do it. It is based on our work with more than 55 international nongovernmental organizations (INGOs) through the International NGO Impact Investing Network, which we documented in two reports: Amplifyii: The INGO Value Proposition for Impact Investing and Amplifyii: The Next Mile of Impact Investing for INGOs. From years of conversations about highly successful ventures and disappointing failures, we have learned that, while international NGOs have important value to add to the impact investing ecosystem, impact investing is not right for every organization.
The full tool involves a comprehensive review of the fit between impact investing and a nonprofit’s mission, culture or stakeholders. But organizations can do a basic assessment by answering these six questions:
1. Why Impact Investing?
Is your organization primarily interested in impact investing to generate new revenue for the organization or to amplify its mission?
We have found that organizations primarily interested in using impact investing to replace a decline in donor funding have been the most likely to never get started or fail completely. Nonprofits already experiencing fundraising issues simply won’t have the capital to invest in a new approach and those that fear future declines are often too risk averse to take the leap. While a successful investment will generate revenue in the future, it won’t help a nonprofit weather a tough fundraising year in the short run.
Read the complete post.