James Lee Sorenson provided the Eccles School of Business with gift in 2013 to create the James Lee Sorenson Global Impact Investing Center (SGI Center) which focuses on impact investing. He wrote this guest post about the subject in Forbes.
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Charitable giving has hit a record high in the United States; household, charitable, and foundation giving are all on the rise. In 2014, Americans gave over $350 billion to charities, accounting for over 2% of the country’s GDP. Between 70% to 90% of U.S. households donate to charity every year, and the average household’s donation totals somewhere near $3,000. Studies show that individuals and families are more likely to give during the holidays than any other time of the year.
These are all noteworthy achievements. Good on America for being generous and altruistic.
But the conversation must turn to the sustainability and overall impact of the gift, not simply how much was spent. If you think about it, traditional “checkbook” philanthropy is a rather limited form of giving – $350 billion in donations sounds like a lot of money, but relative to the magnitude of the challenges we face, it’s a drop in the bucket.
Philanthropy also doesn’t do a very good job of measuring the actual impact of all those hard-earned dollars. Trillions have been spent to move the needle on major social problems, yet by many indicators, we’re still stuck treading water. Since the 1970’s, for example, K-12 reading and math achievement have remained stagnant; the U.S. poverty rate has hovered at around 15%; and the average yearly income of the bottom 40% of U.S. households has barely changed.
Moving forward, how could we possibly expect anything different if we keep doing the same old same old? Due diligence is just as necessary to charitable giving as it is to the other aspects of your personal finances. It is time we apply market-like logic to our philanthropic donations.
Cue impact investing.
Impact investing is one of the more exciting developments to emerge from the “social impact” movement of more definitively measuring the results of the social sector and more comprehensively understanding the relationship between inputs (your money) and outcomes achieved. Impact investing, or leveraging private capital for social good, is playing a key role.