Since the term “impact investing” took hold more than a decade ago, we’ve known that making investments that create positive social or environmental impact and generate a financial return would require engagement from both the social and private sectors. However, it wasn’t until 2016 that the extent of the work of international nonprofits in impact investing was revealed, when members of the International Non-Governmental Organization (INGO) Impact Investing Network released their inaugural piece of thought leadership: Amplifyii:The INGO Value Proposition for Impact Investing. That report, featured in the NextBillion post Philanthropy is Changing Fast: 12 Lessons from Three Reports, was the first real landscape report charting the work of INGOs in impact investing. Two years later, the network came back together to release the next chapter of the story of INGOs in impact investing: Amplifyii: The Next Mile of Impact Investing for INGOs.
The emergence of the private sector as a development actor is a potentially game-changing trend. The reason for its emergence is clear: Official development assistance to the least developed countries continues to decrease and international human development is increasingly becoming part of the core business of corporations. But what remains open for debate is the scope of the private-sector involvement in global human development and whether corporate money should play a role in global development at all.
Partnerships between nonprofits and businesses already exist. They range from corporate philanthropy, to corporate social responsibility, to shared value partnerships. Over the past several years, USAID has established an office for transformational partnerships as part of its Global Development Lab, while organizations such as the U.K. Department for International Development have taken an approach that focuses on poverty reduction through market development and catalyzing private enterprise.
Many large nonprofits are heavily dependent on one donor stream. This means that their systems, processes and tools are geared toward providing services to their largest client, making it potentially difficult to adapt to other partners.
However, a diversified funding base can make an organization more secure, flexible and responsive. The private sector has expertise that can be leveraged to increase the impact of development programs.