What Does Impact Investing Look Like In Action?
The concept is that in order for a philanthropic strategy to be self-sustaining, you need to find a way for the allocation to grow faster than the need that it serves. For example, take the challenge of fighting infectious diseases. It would be possible for a person to spend $100,000 to buy some tuberculosis test kits that would be used by charitable organizations to test for tuberculosis. As a result, the $100,000 would be used up; it would be a donation.
As an alternative, a person could invest the $100,000 in a for-profit company that had developed a new technology that significantly increases the accuracy of tuberculosis tests. When making the decision to invest in the tuberculosis test company, a person should acknowledge the possibility that if the company went out of business, the investment could turn into a donation. But there is also the possibility that the company could grow into a large, profitable enterprise that helped win the war against infectious disease. Even better, the company could get acquired, giving an investor an excellent return.