Dear reader
Is the charitable sector on the verge of a paradigm shift? Entrepreneurial forms of funding are being widely discussed. Foundations are already considering making impact investments when it comes to investing. The change in practice for tax exemption in the canton of Zurich now opens up funding for impact investment. In addition to investments, it is now also possible to issue interest-bearing loans or convertible bonds, with part of the money flowing back into the foundation’s assets in the form of interest, income or profit-sharing.
Such a dual approach has the potential to significantly increase the impact of philanthropic efforts. Proponents argue that entrepreneurial philanthropy can be a more effective way of tackling poverty in the Global South. The Indian start-up Oorja, which uses solar energy to improve the living conditions of farmers, impressively demonstrates how economic success and social benefits can go hand in hand.
But as promising as the approach may be, it also raises questions. Can foundations maintain their independence as market principles become more influential? If you take up the challenge and expand traditional funding models with entrepreneurial approaches, you need to define precise objectives and then measure the impact achieved. Transparency is crucial to maintaining credibility.
In this issue of The Philanthropist, we shine a spotlight on impact investing. There is no question that it will give new impetus to the foundation sector. Those who close themselves off to the trend of entrepreneurial support run the risk of falling behind. But the balance between financial profitability and social responsibility is challenging; this balancing act is crucial to keeping the greater good front and centre. Challenge accepted? Then it’s time to head towards break-even point!
The Philanthropist-Team
