Field Notes: Money and Power in Impact Investment

How do donors influence the operation and outcome of social impact organizations? Tris Lumley says it’s all about power shifting.

In a previous Field Notes article, we mentioned a New York Times article where a Chinese millionaire attempted to give cash to homeless men and women at an event in New York City but dramatically failed, as the cash-giving got turned down by its partner organization, the nonprofit New York City Rescue Mission. If what Rescue Mission did resonates with what Columbia's Christopher Blattman calls the "typical paternalistic nature of donors in philanthropy," then can we find similar characters in the donors of impact investment? New Philanthropy Capital’s Tris Lumley in his Pioneers Post article talks about the power dynamic between donors and the social purpose organizations they financially support. He gives examples to explain to what extent money and power influence navigate the social missions of trusts and foundations, especially when donors interests are not in line with such missions:

Individual donors may be interested in impact, but they’re more likely to ask about what percentage of their gift will get to the front line, rather than being spent on ‘overheads’. Trusts and foundations may ask about outcomes, but they’re less likely to back that up with support to the organisation to develop an evaluation framework that helps them develop learning and continuous improvement… If we zoom out to think about what’s going on, what we’ve really got is relationships, power and money. Funders have money, so they have power over social purpose organisations that may apply to them for that money. Once the social purpose organisation has money, it has power over beneficiaries, who rely on their programmes and activities… Impact measurement is just a tool, and as with any other tool, it can be used for good or ill. It can be used to distribute power—to empower—but it can also be used to concentrate power. Philanthropy can be seen as act of exercising power—the person with the money gets to choose what happens to those without it.

Do you agree or disagree with Lumley's statement that "impact measurement is just a tool" to "distribute" or "concentrate" power? How does it affect the ways in which foundations and organizations operate vis-à-vis donor interests?

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