Philanthropy Or Impact: Both Please

by .
Originally published in Impact Investor

Impact Investing is steadily becoming a mainstream option for investors large and small. Philanthropy, which has been around for centuries, is looking a little jaded by comparison. It smacks a little of amateurish do-gooding, a bit self-indulgent perhaps, even a bit hit and miss, dependent on how well a foundation or family office has done this year. It is an inescapable facet of philanthropy that long-term funding is contingent on individual or family fortunes.

Yet in truth both philanthropy and impact investment are needed, and the dividing lines between the two are starting to become very blurred. While philanthropy by definition exists within a fairly loose regulatory framework, impact investment is and will be ringed by very tight – and necessary – regulation, to protect the investor, who often will not be very rich at all. According to the recently published 2015 BNP Paribas Individual Philanthropy Index, impact investing is “seen as the most promising trend by most philanthropists worldwide” as “it offers the potential of unleashing a huge base of capital to fund sustainable market conditions.” The critical phrase there is ‘huge base of capital’; impact investing can potentially unleash vastly more capital than any amount of philanthropic initiatives.

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