What Is Social Impact Investing?
Social impact investing can transform your approach to philanthropy by aligning your investments with both social and financial goals in mind. Rather than viewing charitable giving and investing as separate activities, social impact investing allows philanthropists to deploy their capital in ways that generate measurable positive outcomes in their communities while also earning significant financial returns.
Impact investing has become part of a growing movement among philanthropists who want to see their dollars create change beyond traditional grantmaking and endeavor to address community challenges while maintaining sustainable financial benefits.
For Houston donors seeking to maximize their philanthropic impact, social impact investing provides an opportunity to tackle local challenges closest to home. At Greater Houston Community Foundation, we help donors make a difference with their dollars, providing the expertise and giving vehicles needed to integrate impact investing with their broader charitable financial strategies.
Keep reading to learn more about impact and social impact investing, or get in touch with the Community Foundation today to get started.
Key Insights
- Social impact investing allows philanthropists to deploy capital in ways that generate both measurable social outcomes and potential financial returns.
- Houston donors can address the city’s most pressing challenges—including economic mobility, affordable housing, workforce development, —through strategic impact investments that leverage the city’s position as an innovation hub.
- Greater Houston Community Foundation offers multiple impact investing giving vehicles, including recoverable grants, philanthropic loans through donor advised funds, and collaborative grantmaking opportunities, all supported by comprehensive education and due diligence services.
- Impact investing enables donors to recycle their charitable capital as investments are repaid, creating a multiplier effect that potentially allows the same dollars to generate impact multiple times.
- The Community Foundation serves as a trusted connector and guide, leveraging deep local knowledge and extensive networks to help donors sort through the complexity of impact investing without having to do it alone.
Table of Contents
- What is a social impact investment?
- Key principles of impact investing
- Why social impact investing strategy matters to Houston
- How to get into social impact investing with the Foundation
- What is an example of social investing?
- Benefits of ESG and impact investing funds for donors
- Partner with the Foundation to make your mark
What is a social impact investment?
Social impact investing has emerged after decades of evolution in the investment and philanthropic sectors. The concept gained traction as donors increasingly looked for ways to align their investments with their values, coinciding with the growth of environmental, social, and governance (ESG) and mission-related investing.
Social impact investing differs from traditional investing and philanthropy in a few important ways:
| Traditional investing | Social impact investing | Traditional philanthropy | |
| Primary goal | Financial returns | Dual returns (financial and social) | Social impact only |
| Expected returns | Market-rate financial gains | Anything from no to low to Market-rate returns. Social outcomes are first priority over financial returns. | Social outcomes with no expectations of financial return. Grants-only. |
| Capital recovery | Full principal and gains expected | Principal may be recovered and redeployed | Funds are granted out permanently |
| Risk profile | Financial risk only | Financial- and impact-related risk | Impact risk only |
Social impact investing occupies the middle ground, offering donors the ability to support causes they care about while potentially recovering and redeploying their capital over time.
Key principles of impact investing
Successful impact investing strategies are built on four foundational principles that distinguish them from other forms of investment:
- Intentionality drives every decision, with investors explicitly seeking positive social or environmental outcomes alongside financial returns.
- Donor choice and intent remains central to impact investment philosophy, allowing philanthropists to direct their capital toward causes and communities that align with their values and priorities.
- Measurable outcomes ensure accountability through clear metrics that track both social impact and financial performance.
- The expectation of dual returns balances the pursuit of social good with financial sustainability, ideally creating a model that can scale and perpetuate impact over time.
Why social impact investing strategy matters to Houston
Houston faces unique challenges that make it an ideal environment for innovative philanthropic strategies like social impact investing. The city’s diverse population and high-powered economy create both opportunities and pressing needs that traditional approaches to philanthropy and investing may not fully address.
Social impact investing allows Houston donors to address the city’s most pressing challenges, which span multiple sectors and require sustained, examples of innovative solutions include:
- Economic mobility: Supporting workforce development programs and small business incubation that create pathways to prosperity.
- Affordable housing: Financing community land trusts and affordable housing developments that address housing shortages.
- High-quality early childhood education: Expanding access to early learning programs that prepare children for long-term academic and social success.
- Workforce development: Investing in training programs that prepare Houston residents for emerging industries and high-demand careers.
- Climate resilience: Funding infrastructure improvements and green technology initiatives that protect communities from extreme weather events.
- Health access: Supporting healthcare access initiatives and community health programs that address disparities across Houston’s diverse neighborhoods.
Houston’s position as a global energy capital and emerging technology center creates unique opportunities for impact investors. The city’s density of resources and commitment to community-driven solutions make it fertile ground for innovative approaches that aim to generate both social impact and significant financial returns.
How to get into social impact investing with the Community Foundation
Greater Houston Community Foundation serves as a trusted partner for donors seeking to explore impact investing alongside their traditional philanthropic activities. Our role extends beyond simply facilitating investments to include education, due diligence, and ongoing support throughout the impact investing journey.
We provide education about different impact investing strategies and help donors understand how these approaches can complement their existing donor advised funds* and charitable giving plans. Our due diligence process ensures that potential investments align with both impact goals and appropriate risk profiles.
We also offer multiple charitable vehicles for impact investing:
- Recoverable grants provide funding to organizations with the expectation that successful programs will repay the principal, allowing donors to redeploy capital to additional initiatives.
- Philanthropic loans from donor advised funds can offer below-market-rate financing to nonprofits and social enterprises, with repayments returning to the donor’s fund for future charitable use.
- Third-party investment management connects donors with specialized investment managers who can identify and manage values-aligned investment opportunities.
*Continue reading: What is a donor advised fund?
What is an example of social investing?
Looking for impact investing examples that show the power of these strategies? The story of Ken Bohan and Avenue 360 Health & Wellness demonstrates the transformative potential of impact investing through philanthropic loans.
Avenue 360 provides healthcare services to Houston’s underserved communities through seven locations across Greater Houston, serving patients regardless of their insurance status or ability to pay. The organization takes a 360-degree approach to healthcare, addressing not only medical needs but also social and environmental challenges like housing that disproportionately affect communities of color.
During a particularly challenging period, Dr. Flash, Avenue 360’s leader, found herself facing a critical funding gap that threatened the organization’s ability to maintain essential services. When longtime supporter Ken Bohan learned of the organization’s financial distress, he immediately recognized an opportunity to provide strategic support beyond traditional grantmaking.
Rather than offering a standard charitable gift, Bohan proposed something innovative: a multi-year loan structured through his donor advised fund at Greater Houston Community Foundation.
The impact of this arrangement extends far beyond the immediate financial relief. As Avenue 360 makes loan payments, those funds return to Bohan’s donor advised fund, where they become available for future charitable activities. This creates a multiplier effect that allows the same dollars to generate impact multiple times—all from an avenue that many philanthropists and charitable organizations often leave unexplored.
Benefits of impact investing funds for donors
Social impact investing offers a handful of unique advantages that make it an attractive addition to many comprehensive philanthropic strategies and financial plans.
Deep values alignment
Impact investing allows donors to align their investments more closely with their charitable values. Rather than separating your investment portfolio from your philanthropic activities, you can integrate both functions to create a more cohesive approach to wealth management.
Capital recycling opportunities
Unlike traditional charitable gifts, where funds are granted away permanently, impact investments create opportunities to recover and redeploy capital. When investments are repaid, donors can reinvest those funds in new impact opportunities or redirect them to traditional charitable activities.
Next-generation engagement
Impact investing often resonates strongly with younger family members who are motivated by the dual pursuit of social impact and financial sustainability. Incorporating impact investing into family philanthropic strategies can provide a bridge between generations and create opportunities for meaningful engagement around shared values. Impact investing initiatives often act as catalysts for deeper conversations about generational wealth and legacy planning.
Enhanced due diligence and measurement
Impact investing typically involves more rigorous measurement and evaluation than traditional philanthropy, providing donors with clearer insights into the effectiveness of their charitable activities. This enhanced accountability can improve decision-making across all philanthropic activities and help donors refine their strategies over time.
Tax advantages and strategic giving
When structured appropriately, impact investing can provide the tax benefits of charitable donations while maintaining flexibility for future charitable activities. Donors can take advantage of tax deductible donation opportunities when funding their impact investing activities, particularly when using donor advised funds or other charitable vehicles. Additionally, strategies like donating appreciated stock can provide additional tax advantages while funding impact investments.
Interested in getting started with impact investing? The Community Foundation can help.
What is a community foundation if not a bridge between donor and community needs? The Community Foundation’s combination of deep local knowledge, trusted advisor status, and convening power creates an ideal environment for social impact investing success. We understand Houston’s nonprofit ecosystem and can identify opportunities that align with both community needs and donor interests—and our relationships provide access to opportunities that individual donors might not discover on their own.
You don’t have to do this alone. We provide ongoing support throughout the investment lifecycle, from initial due diligence through impact measurement and eventual capital recovery or redeployment—as well as guidance to make sure that your impact investing activities align with your overall financial goals, meet regulatory requirements, and make the maximum impact.
Ready to explore how social impact investing can transform your philanthropic strategy and allow you to make an impact for years to come? Call Greater Houston Community Foundation at 713-333-2210 or reach out directly to get started.
More Helpful Articles by Greater Houston Community Foundation:
- How To Start an Employee Giving Program
- The Importance of a Strong Philanthropic Network
- Donor Advised Funds Tax Benefits
- Maximizing Corporate Philanthropy
- Integrating Philanthropy into High-Income Tax Planning
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