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Transparency for Impact

If my email inbox had a theme in the past few weeks, it’s been transparency. The Center for Effective Philanthropy (CEP) just released a report called Sharing What Matters: Foundation Transparency. In a blog post upon its release, Ellie Buteau, CEP’s vice president of research, called for “a more nuanced conversation about transparency in philanthropy,” challenging foundations to share information that is useful to both foundations and grantees as we seek to advance positive change on difficult, complex issues CEP notes that the field has made advances in sharing grantmaking goals, strategies, and processes — which nonprofits do appreciate and deem useful. Foundations, however, could be doing much more to provide transparency around what we’ve learned and experienced.

When Foundations are Uncharitable” was the headline of the next missive to catch my eye. Responding to the CEP report, Marc Gunther is blunt in his critique of foundations, writing: “After all, foundations exist to make the world a better place, by alleviating suffering or promoting well-being. They ought to deploy all of their resources — their grants, their investment assets and their knowledge — to those ends. But they don’t.”

Sharing What We’ve Learned

The McKnight Foundation recently released version 2.0 of our impact investing website. It is distinct in that we are providing simple, portfolio-level details about all of our impact investments and our three types of expected returns: financial, environmental and social impact, and learning.

McKnight’s learning returns have offered additional market perspective to our program staff, as well as our grantees, as they consider ways to expand their tool kits for social change. For example, we hosted more than 20 Mississippi River program grantees to learn about the work of Encourage Capital, which is developing investment tools to tackle water scarcity in the Colorado River. While the Colorado and Mississippi Rivers face far different sustainability challenges, the overall framework for attracting private investment to address riverine issues stimulated some creative ideas for applying these concepts locally.

Moreover, we’ve been surprised by the number of queries about our investment program from fellow foundations as well as other institutional investors and organizations. They are particularly interested in getting answers to “how” questions — how to get started, how to maintain proper oversight, how to find investments, how to work with partners. As we fielded these individual inquiries, it became apparent that providing such concrete details would be useful to a broader audience.

Just as nonprofits have enthusiastically affirmed the value of understanding a grantmaker’s goals, strategies, and processes — so too do potential investees benefit when a foundation readily provides its impact investment goals, strategies, and processes. We’ve gone one step further and added details about the results we are seeing so others can learn from our experiences. In a nascent — and sometimes confusing — field like impact investing, the more learning we can reap from each other, the better.

Sharing Useful Details Can Matter

Case in point, shortly after the site’s launch, I received an email from the director of a nonprofit lending institution that focuses on rural development. He wrote:

“… kudos to you for sharing information on the amount and terms of program-related investments you have made. There is a dearth of transparency around these investments from many foundations. As we raise capital for our own CDFI [Community Development Finance Institution], the lack of transparency makes it difficult to understand the market and develop benchmarks around the role PRIs might play in our capitalization strategy. We have identified PRIs as a source of capital for our CDFI, and we have a list of Foundation[s] where we think there is a good match between their PRI goals and our CDFI activity. But as I research the PRI activity of these and other Foundations, for the most part, the simple information you provided (amount, length of term, and interest rate) is absent.”

As more foundations mobilize endowment dollars for program-related investments and other forms of mission-related investing, answering this request for simple information is low-hanging fruit. With only a little stretch, we could all begin to provide useful information to those seeking to deploy non-grant forms of capital for public benefit.

As we weigh the legitimate risks and rewards of transparency in this space, let’s not make sharing useful information with others harder than it needs to be. Let’s seize the opportunity for continuous improvement and, at a minimum, cover the basics.

Topic: Communications, Impact Investing

March 2016