Men are more likely to use impact investing as a replacement for charitable giving. Why?
The rise of impact investing — which seeks to achieve both financial and social returns — is exciting to watch. It underscores a growing interest in social impact, and encourages all of us to use our dollars to invest in the change we want to see. At the same time, it raises important questions for the philanthropic sector: how does impact investing relate to traditional charitable giving? And how should organizations evolve their strategies as impact investing continues to gain steam?
Our latest report from the Women’s Philanthropy Institute, “How Women and Men Approach Impact Investing,” explores these questions and more through a gender lens. It is one of the first reports to do so. You can view the key findings in this infographic, but here’s one that gave me pause for thought:
Households where men make charitable giving decisions – either as single men, or as sole deciders within their marriages – are more likely to replace charitable giving with impact investing.
While we address some of the possible reasons behind this finding of the report, I wanted to hear reactions from those on the front lines. Why are men more likely to see impact investing as a replacement to charitable giving while women see it as a complement? Does this dynamic mirror real-world experiences? Here’s what they had to say.
Men often lead with “or” while women start with “and.”
Kathleen McQuiggan, wealth advisor with Artemis Financial Advisors and Invest In Women advocate, said: “We are finding that more women investors want to talk about how they can put their wealth to work earning financial returns AND they are interested in having an impact. The conversation with most men often is still the OR decision; I could invest in charity OR think about an impact investment. The question ‘What do you want your wealth to do for you?’ is the starting point, and then how we get there is where we really get down to talking about what matters to each individual.”
The finding underscores gender norms around both investing and philanthropy.
Yasmina Zaidman, chief partnerships officer at Acumen, said: “This finding seems to be a reflection of current gender norms, but norms can and must change. This finding could be linked to the fact that traditional finance has excluded women; as investors and as investees, women may not fully trust investment as the ONLY way to tackle social challenges. Men, at the same time, may be less comfortable with philanthropy that has historically been an endeavor where human emotions come into play and where social impact metrics have been unreliable. At Acumen, we think an inclusive approach is what is needed to tackle the biggest problems of poverty.”
Women understand that philanthropic and investment capital must work together.
Rehana Nathoo, founder of Spectrum Impact said: “Research shows that women, alongside millennials, view their capital as a tool to maximize value as much as maximizing returns. There’s this cognitive awareness that profit and purpose don’t always sit separately from one another. In fact, they can be used to leverage more value from the other. Impact Investing – as an investment discipline – exists along a spectrum. That spectrum champions tools that meet investors at their risk/return levels, honoring concessions when needed and maximizing financial return when desired. Women seem to understand that spectrum more fully, that philanthropic and investment capital can co-exist and work together to maximize value.”
Women have more experience with social change organizations.
Shelley Whelpton, senior managing director with Arabella Advisors, added: “While I talk to both men and women who increasingly use impact investments as a way to accomplish their philanthropic goals, it’s also true that many women have long been deeply engaged in the work of giving—partnering closely with the organizations and people doing the crucial work of social change. It’s easy to imagine that people who have been closer to that work may be more likely to see impact investing as a complementary way to advance it.”
What should philanthropists and foundations keep in mind as impact investing continues to grow?
We also asked experts and practitioners more generally about the relationship between traditional philanthropy and impact investing.
Marty Cordes exemplifies a complementary approach through her work at the The Cordes Foundation. She said: “Impact investing has served as a complement, rather than a replacement, to our family foundation’s charitable giving since inception. Over the last 11 years, we have progressively increased the percentage carved out of the corpus to make impact investments until we reached 100% across asset classes in 2015.”
Tifany Boyles, director of global philanthropy for Street Business School (SBS) by BeadforLife, agrees that impact investing and philanthropy serve distinct purposes: “Impact investing offers opportunities to create social impact where none previously existed, which is brilliant. However, when social impact is the top priority, introducing an element of consumer self-interest, such as ROI, can erode impact and threaten success. Strategic philanthropy is uniquely positioned to create social change. The unique values philanthropy brings to society, such as the innovations derived from freedom to experiment without investor pressure, are irreplaceable and uncompromising.”
How does the rise of impact investing influence donor engagement strategies?
Teresa Coffey-Gordon, founder and CEO of Coffey Exchange, said: “From a fundraising perspective, impact investing and venture philanthropy are here to stay, so organizations need to develop ways to bring them into their toolbox to stay competitive and relevant.”
Let’s continue the discussion.
Clearly, this topic gives us a lot to think about, and we know that more research is needed. In the meantime, whether you are a donor, a philanthropist, a fundraiser, a nonprofit founder, a wealth advisor, an investor or a social changemaker, we hope our latest WPI study will spark new ideas and considerations as impact investing continues to grow. As always, your comments are appreciated.
This research was conducted with funding from the Bill & Melinda Gates Foundation. The findings and conclusions are those of the study’s authors and do not necessarily reflect official positions or policies of the Bill & Melinda Gates Foundation.
Original post on LinkedIn and Indiana University’s Lilly Family School of Philanthropy