Social Impact Investing: How Profit Motivation can Power Social Change

by Jon Chin

Image courtesy of mottmac.com
Image courtesy of mottmac.com

Right around the corner of NYU, The New School is hosting a series of phenomenal speaker events open to the general public. Dubbed the Nth Degree, they are bringing in “thinkers, visionaries, and creators” who are making a positive impact on society, from prison reform to ethical business practices to environmental justice. On September 26th, they hosted speakers from the Impact Finance Center in an event titled, “Social Impact Investing for Sustainability.” While not explicitly part of the Nth Degree series, the night shared the same values: how to navigate the real world—the world as it is—and steer it to the right path.

Now, I’ve been a giver for a large part of my life. It’s a character trait/flaw that’s influenced what I study, where I work, how I spend my time, and what I love. Whenever money enters the conversation, I start to feel guilty; I sometimes compensate for that feeling by undercharging people or working overtime for free. Even when I know my clients can afford it, I deflect these conversations. And I imagine that I’m not the only person who does this; we sometimes think that profit somehow cheapens or mis-motivates our work.

In actuality, by giving away time and money, we limit the effectiveness and sustainability of our efforts. This was the primary message of the event. Here’s a tangible example they used: say you have $20,000 and you want to improve the affordability of higher education. You can give out a one-year scholarship to an exceptional student and, ostensibly, both of you are happy. However, this is a 100% loss and you’re unable to make the same impact the following year.

Impact investment would be giving out a $20,000 loan instead of a scholarship. This idea may make you uncomfortable but if that loan carried a 1% interest rate, it would have a greater impact than a scholarship. The initial capital would be returned so that you could give it out again in year two, year three, and beyond. The student would even benefit because he or she would be charged a much lower rate than at a traditional loan.

More importantly, framing social impact as a financial transaction greatly improves its reach. The key speaker, Dr. Stephanie Gripne, said that she was able to get highly conservative companies to invest in human interest programs that they normally wouldn’t have touched. They wouldn’t care about, say, preserving a historical landmark, unless it translated into a revenue stream. Gripne and the IFC are able to manipulate this desire to secure funding for causes that traditionally have a difficult time finding investors.

This mindset is part of other phrases like social venture and social entrepreneurship, which are bouncing around a lot at NYU. NYU Stern’s $300k Entrepreneurs Challenge, The Blackstone LaunchPad at NYU, and the NYU Reynolds Changemaker competition all emphasize this need to be financially sustainable. The Office of Sustainability’s Green Grants program has also been instrumental in supporting social-entrepreneurial projects to advance sustainability at NYU.  As a giver, it’s tough to accept that I may have to be profit-motivated to have the largest impact. But as I sit in the classrooms at the New School and at NYU, listening to these industry leaders, I’m starting to come around to their wisdom.

If you also want to make a positive social impact, I suggest you learn this line of thinking. It might ultimately not be the right fit for your vision, but it could make the difference between sustainable success and failure, between making a change today and making one 3 years from now, between feeling supported and feeling debilitating stress.

In you’re interested in learning more, check out the Impact Finance Center at the New School as well as these competition and challenges are NYU.  A calendar of upcoming events in the Nth Degree series can be found here.

Jon Chin is an educator, poet, software engineer, blackbelt, and social activist. He is the founder of Share Meals, an organization dedicated to ending hunger and isolation among students. His greatest concern is how to leverage breakthrough technology to address the human condition in new, disarming ways. His classrooms are often attended by laughter, sometimes so much that they’re asked to pipe down. He’s pursuing an MA at NYU Steinhardt for English Education in Colleges.

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