community development finance

community development finance

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© Lester M. Salamon 2014

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Library of Congress Cataloging-in-Publication Data

Salamon, Lester M. Leverage for good : an introduction to the new frontiers of philanthropy and social investment / Lester M. Salamon. pages cm Includes bibliographical references. ISBN 978–0–19–937652–0 (hardback : alk. paper)—ISBN 978–0–19–937653–7 (pbk. : alk. paper) 1. Endowments. 2. Charities. 3. Social service. I. Title. HV16.S26 2014 361.7—dc23 2013040023

9 8 7 6 5 4 3 2 1 Printed in the United States of America on acid-free paper

“There are moments in history when the needs of an age prompt lasting, promising innovation.”

—Monitor Institute, 2009



List of Figures ix List of Tables xi List of Boxes xiii Foreword by Rip Rapson xv Acknowledgments xxi


1 Introduction: The Revolution on the Frontiers of Philanthropy and Social Investment 1

2 Scouting Philanthropy’s New Frontier I: New Actors 25

3 Scouting Philanthropy’s New Frontier II: New Tools 55

4 Why Now? 78

5 Remaining Obstacles 93

6 Prescription: The Way Forward 106


A New Frontiers of Philanthropy Project Advisory Panel 117

B Companion Volume New Frontiers of Philanthropy: A Guide

to the New Actors and Tools Reshaping Global Philanthropy and Social Investing: Lester M. Salamon, Editor 119

Notes 123 Glossary 139 Bibliography 143 About the Author 153 Index 155


List of Figures

1.1 Philanthropy’s “Big Bang” 3

1.2 The New Frontiers of Philanthropy Ecosystem 7

1.3 US Nonprofit Capital Needs and Success in Securing Capital, 2006 23

1.4 US Nonprofit Difficulty Accessing Investment Capital from Various Sources 24

2.1 Actors and Tools on the New Frontiers of Philanthropy 26

2.2 The Relative Domains of Impact-First and Finance-First Social-Impact Investors 30


List of Tables

1.1 The New Frontiers of Philanthropy paradigm 6

1.2 Acumen Fund investments, by portfolio type 10

3.1 Asset classes of social-impact investments 57


List of Boxes

1.1 Calvert Foundation: A multi-tasking social-impact investment firm 13

1.2 Investment capital versus operating revenue 22

2.1 Acumen Fund mission statement: Changing the way the world tackles poverty 32

2.2 Edna McConnell Clark Foundation: How We Work 43

2.3 7 key characteristics of European venture philanthropy 45

3.1 Aavishkaar International 66

3.2 Quasi-equity 69

6.1 Key gaps in knowledge on the part of potential social investees 113


Foreword Rip Rapson

American philanthropy is in the midst of one of its most turbulent and interest- ing transformations in nearly a century. The changing terrain of charitable giving is evinced by an at-times baffling proliferation of new actors, new tools, and new organizations, challenging everything from philanthropy’s traditional ways of doing business to how we think about defining our social objectives. Navigating that terrain is difficult enough for someone whose organization is in the thick of it, let alone for newcomers to the field.

That reality makes the present monograph, and the companion volume for which it serves as an introduction, indispensable reference points for new and experienced practitioners alike. They provide what the sector has long been missing: a coherent, comprehensive, and compelling road map that brings together an array of disparate pieces into a coherent whole. They will provide a resource and shortcut that will not only help my organization—the Kresge Foundation—but also, I believe, the sector as a whole emerge from these trans- formations more organizationally effective, vibrant, and vital. That is why we at Kresge so enthusiastically supported the creation of these volumes, and why we are so pleased with the results.

Indeed, I wish this material had existed five years ago when Kresge began its own transformation—a transformation that is emblematic of, and aligns with so many of, the trends and themes outlined in the pages that follow. So allow me to start by describing the particulars of Kresge’s experience, in the hope that they will help illustrate the importance of this project for the sector as a whole.

The Kresge Foundation’s Path The Kresge Foundation I joined in 2006 was defined by one tool—the capital challenge grant, which sought to build the capacity of nonprofits by helping them complete capital campaigns for building projects. Kresge’s brand was crys- tal clear: we were synonymous with bricks and mortar.

xvi Foreword

It was a remarkable legacy, one we are proud of to this day. Not only had we assisted thousands of organizations in getting important projects to the finish line, we had also defined an admirable set of competencies that distinguished us within the philanthropic cosmos:

• We got good at something and stuck to our knitting—as such, we were able to separate the good project from the great project and readily identify the strengths and weaknesses of proposals.
community development finance



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