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Socap Day 2: Unlocking the Nonprofit Capital Space

By Nell Edgington



Day 2 of SoCap was by far my favorite. It started with an interesting keynote from Julie Sunderland of the Gates Foundation. She offered a perhaps more realistic, bordering on the pessimistic, view of the social capital market space. She said that Gates struggles to find entities that can absorb the size investments they want to make. They get excited about the idea of bringing together foundation, government and private dollars in stacked deals, but that the work is complicated and hard and they have yet to craft one of these deals simply because it is extremely difficult to determine the terms. All of this underlines what I’ve said in a previous post: in the nonprofit, philanthropic and government worlds there is still much work to be done to unlock capital.

The first session of the day for me was “Lessons of Behavioral Finance: Understanding and Overcoming Barriers to Impact Investing” with Hope Neighbor and her ground-breaking research, Money for Good, released earlier this year calculating a $120 billion pool of potential impact investing money that is sitting on the sidelines. Hope said that despite our desires to the contrary, people still very much think of their charitable giving as separate from their impact investing, “the reality is that people compartmentalize their money.” And only 3% of the population uses data to compare the organizations they give to.

My favorite session of the day, by far, was “Deep Dive Into the Evergreen Cooperative Initiative.” This session was exactly what I was hoping to see more of at SoCap this year. A group of leaders in Cleveland realized that the heart of their city was quickly deteriorating and no one was doing anything about it. They formed a coalition of the anchor institutions in Cleveland (Case Western Reserve University, Cleveland Clinic, etc), foundations, city leaders and others to create the Evergreen Cooperatives that brings career-track jobs and green, employee-owned businesses to the inner city, transforming a city that has lost 50% of its population in the last 50 years. Beyond the fascinating coalition, business model and results this project is achieving, lies its impressive financing. A combination of bonds, foundation grants, loans, HUD money and others launched this project and financed the 3 businesses they currently operate (a green laundry, an organic greenhouse, and a solar power company).  According to Evergreen leaders, “Cleveland wants to be where the world is going, not where the world is.”

To scale this project to create 5,000 jobs (the area needs 46,000 jobs), which will be the impetus to truly transform the inner city economy, they are creating a CDFI and looking to use PRIs and MRIs. What excites me so much about this project is not the spirit of collaboration and tremendous results, but how they are bringing public, private and philanthropic money together in a truly innovative convergence. THIS is the kind of social capital market I’m talking about. Impact investing is great, but it is only ONE piece of the puzzle. I would love to see more examples like Evergreen at SoCap.

The last breakout session I attended for the day was “Nonprofit Analysis: Beyond Metrics,” which gave a great overview of the growing nonprofit evaluators market through the lens of rating one nonprofit, DC Central Kitchen. It was interesting to see how Charity Navigator, the most well-known nonprofit evaluator, has evolved from a system driven purely by IRS 990 form overhead ratios to a three-pronged review including transparency and impact evaluations.

The end of the session gave me serious pause, however, when a member of the audience asked whether any of the evaluators might use the GIIRS system coming out of the impact investing world to rate nonprofit impact. Ken Berger admitted he wasn’t familiar with GIIRS and Tim Ogden of GiveWell said he was skeptical of social return on investment (SROI) calculations in general. Again, my point that the philanthropic and impact investing worlds aren’t communicating and collaborating becomes apparent. Wouldn’t that be amazing if impact in both the philanthropic and impact investing worlds could be measured in a comparable way? That would be truly innovative!

So, although Day 2 of SoCap provided much more conversation and examples of how the philanthropic and government capital markets are evolving, there is still much work to be done to bring both capital fully into the social capital market. Perhaps at SoCap 2011?

Photo Credit: Markets for Good

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About the Author: Nell Edgington is President of Social Velocity (www.socialvelocity.net), a management consulting firm leading nonprofits to greater social impact and financial sustainability. Social Velocity helps nonprofits grow their programs, bring more money in the door, and use resources more effectively. For more information, check out Social Velocity consulting services and clients.


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4 Comments to Socap Day 2: Unlocking the Nonprofit Capital Space

[...] This post was mentioned on Twitter by changefeed, Nell Edgington. Nell Edgington said: Day 2 of #SoCap10 moved to unlock philanthropic capital, but there is still work to do: http://bit.ly/awK0wa #nonprofit [...]

[...] their assessment systems with IRIS and GIIRS left many of us concerned (see Nell Edgington’s post on Socap Day 2; it was also a point raised through Twitter after the presentation). GiveWell remains pretty [...]

Magnus Young
October 11, 2010

Measuring impact in a standardised way across both for-profit impact investing and non-profit charitable work is not a problem in my view.

GIIRS is great for what it is aiming to do, and it is quite clear that it is responding to a marked demand – notably from impact investors. However, it may not be suitable for rating all types of entities, and it is quite rigid in terms of what it measures.

SROI can be used in both sectors, though I understand the reluctance to rely on it given current lack of standardisation (despite MANY actors claiming they are in the process of standardising a SROI calculation tool – see also REDF’s contribution at SoCap10). SROI is also problematic in that certain types of impact are readily converted into large pecuniary measures (e.g. climate change prevention), whereas other impacts are harder to assess in monetary terms (e.g. public campaigning/advocacy). Finally, there is clearly a danger that over-reliance on SROI a tool for comparing and distinguishing between different entities based on monetary valuation of their impact could channel funding to the first category at a cost to the latter category.

In my mind, the best current initiative is IRIS as an underlying standardised reporting language, permitting overlay of different impact measurement methodologies as need be. The latest version of IRIS, now on the GIIN websites, is truly a great effort towards adequate output/outcome reporting for both non-profit and for-profit entities. Based on IRIS data, you can then do your GIIRS if that’s what you want, or an SROI based on these data, or compare bespoke indicators of activity and implied impact as you see fit.

Nell Edgington
October 11, 2010

Magnus,

Thanks for a really helpful framing of this issue. It may be that IRIS is the way to start to connect the nonprofit and impact investing measures of impact. Although I’m still holding out hope that the final comparison of impact could be somewhat parallel in the nonprofit and impact investing sectors, if not GIIRS, then maybe with a new, yet to be developed, tool. It remains to be seen, but much work yet to do.

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