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The New Philanthropy - New Models For Social Impact

Raj Melville

New approaches to charitable giving have changed the way organizations address social issues in the past. The impact of donors like Bill Gates and Warren Buffet has radically changed the traditional models of philanthropic giving.  Bringing a business and technical focus from their entrepreneurial roots, organizations like the Gates Foundation, Google.org, and the Omidyar Network have introduced results-focused giving to the staid world of traditional philanthropy. In addition, newer sources of funds have entered the area with ‘venture philanthropists’, like New Profit and the Acumen Fund that invest in and manage social organizations, to social impact funds, like Calvert Foundation’s Community Investment Note program, that generate both social and financial returns. At a grass roots level, online forums like Kiva.org and MicroPlace.org provide new avenues that enable individual citizens to see the direct impact of their dollars on projects in developing countries.

A panel representing four of the leading proponents in this field was convened at the IIT Bombay Golden Jubilee conference in New York.  Linda Segre, Managing Director, Operations & Initiatives, Google.org described how the Google founders had decided to set aside 1% of Equity, 1% of profits and 1% of time when they went IPO to address social issues. Google.org considers itself a hybrid philanthropy. In addition to traditional grants and help thru its Google Foundation, it also can draw on the strength of Google’s balance sheet, if needed. Google.org is not fettered as a 510 c 3 and can also advocate for causes.

Currently Google.org is focused on five major initiatives: Two of these include developing renewable energy sources cheaper than coal and encouraging the use of plug in hybrids. The other three initiatives are more geared to developing countries and include using information and technology to predict and prevent disease outbreaks and other environmental disasters, helping provide information to empower citizens and provide greater accountability and, the most recent initiative, encouraging Small and Medium Enterprises (SMEs) in India and East Africa. Their efforts in India include funding Pratham, an education focused NGO, to help them collect information on the extent educational efforts are making an impact in India. Their SME initiative is looking to encourage business formation for deal sizes from $50K to $1 million. Working in the two target countries, India and East Africa, they expect to create an ecosystem of service providers, like banks, credit sources, accountants, lawyers etc., that would help accelerate growth in this sector. While large businesses in developing countries have access to capital, and individuals have access to micro-credit, there is a large “missing middle” of SMEs that is not covered by either option.  Over 50 percent of  the GDP of richer countries is generated by SMEs. Google believes that encouraging SMEs would unlock economic growth in the developing regions also.

Shari Berenbach, President and CEO of Calvert Foundation, described the history and approach of Calvert Foundation. Calvert Mutual Funds historically provided investors with socially responsible alternatives for their money. As an outgrowth of their pioneering work, they setup the Calvert Foundation that allows investors to make direct investments in underserved communities. Their Community Investment Notes invests in a number of areas ranging from affordable housing, microcredit partners, small businesses and community development projects. Their investors earn a ‘social return’ to that is lower than market rates, but is compounded by the significant social impact their investments make.

The Acumen Fund takes a different tack to investing in the social sector. With an approach very much like a venture capitalist, Acumen invests in emerging social businesses that have significant impact in four major areas – Health, Water, Energy and Housing. Omer Imtiazzudin, Health Portfolio Manager for Acumen and a panelist mentioned that they had in-country resources that work to identify, review and evaluate potential candidate projects. They follow a rigorous evaluation process to select their investments looking for sustainable ideas that address solutions for the Bottom of the Pyramid, the 2 billion people subsisting on $4 a day or less. Typical investments range from $50K to $300K. Working with their portfolio companies, Acumen helps define social metrics that gauge the community impact of their investments. Currently they have over $30 million invested in 17 companies across 6 countries impacting over 10 million people.

As one of the oldest groups focused on social entrepreneurs, Ashoka presents a different perspective. Initially started by Bill Drayton, a former McKinsey consultant and EPA official, to help sustain emerging social entrepreneurs in developing countries by providing a living stipend to its Ashoka Fellows, Ashoka has now expanded to provide a range of services and opportunities for social entrepreneurs. With a track record of nearly 30 years and over 1900 Ashoka Fellows worldwide, they have leveraged their experience to create a complete social ecosystem, Ashoka provides its fellows with access to training, compilations of best practices and with introductions and access to capital. Most recently Ashoka has started an Entrepreneur to Entrepreneur program, headed by Lisa Nitze, Vice President of the program and also a presenter on the panel. The program tries to bring together entrepreneurs from the business and technical communities with social entrepreneurs to share insights, learnings and help support and solve issues that the young social entrepreneurs face. It has been successfully launched in several countries including India and the US.

The follow up discussion was lively and raised several issues.  In response to a question from the audience regarding increasing the active participation of Indians in this field, Lisa Nitze pointed out that she was pleasantly surprised by the strong support her Entrepreneur to Entrepreneur program has received both in India and in the US from the Indian community, Having just returned from a extended speaking tour in India, she observed that the Indian businesses were in some ways ahead of the US in commitment to social responsibility. Several of the companies she met were actively engaged with their community, some going as far as to adopt several villages in an attempt to improve local conditions.

In summary, the cross section of organizations provided a range of perspectives on the innovative new approaches being adopted to help solve some of the most pressing social issues worldwide. With the deployment of talent and financial resources in novel ways, these ‘new philanthropists’ have an opportunity to make significant progress and impact in addressing these problems.

For more information on some of the organizations in this article:
The Acumen Fund: http://www.acumenfund.org
Ashoka: www.ashoka.org
Calvert Foundation: http://www.calvertfoundation.org
Google.org: www.google.org

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