Impact investing vs investing with impact: How to align impact and philanthropy

Impact investing and philanthropy are not necessarily on opposite sides of the scale. However, understanding the differences can ultimately make or break the success of any particular investment. Here are a few insights on how investors should approach the alignment of impact investing with philanthropic donations, measure and manage the impact, and address the possibility of unintended negative effects.
venture philanthropy vs impact investing
Impact Updated on January 16, 2024

Impact investing is experiencing spectacular growth, as the concept keeps on capturing the attention of global investors. The Global Impact Investing Network (GIIN) estimates the current size of the impact investing market at $1.164 trillion. However, while so many find inspiration in making an impact, there is still a great deal of confusion, both among the investors and the startups that seek capital. This lack of certainty concentrates on the very subtle but significant difference between impact investing as a great financial instrument and a philanthropic tool. But in reality, it can be both, which is why it is essential to approach impact investing with consciousness and understanding of anything from the overall purpose of the investment strategy to unintentional negative impact.

Venture philanthropy vs impact investing: what is the difference?

Several aspects contribute to the confusion around impact investing. For starters, some investors believe that there is a clear distinction between investing in for-profit and donating funds to philanthropic causes. But according to Sapna Shah of the Global Impact Investing Network, the binary between investing and philanthropy is a false one. The contrast between traditional grant-making and investing with impact is primarily about the amount of engagement from the investor’s side, as well as the level of commitment and transparency from the financed enterprises.

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Francois Botha

Francois Botha

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Francois believes that the next generation of family leaders need new, simple tools and trusted experts with a fresh outlook.

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