Keeping the jargon straight: "Charity Enterprise" v. "Impact Company"
Words matter. We need to be clear on what the terms mean and the differences between similar ideas or this nascent industry of impact investing will never reach its full potential.
The terms “Charity Enterprise” and “Impact Company” are similar, but bear important differences. Both involve doing good while making money, while each puts different weight and priority on those two outcomes.
A Charity Enterprise is a charity or ministry with revenue-generating activities that helps fund the organization and also complements its mission. Profits stay within the charitable realm and are returns are likely concessionary—that is less than what an investor could expect for similar risk without the impact.
When the Charity Enterprise becomes profitable, it may recycle the profits to fund other aspects of the charity and/or may distribute to donors’ charitable accounts to be granted to other ministries.
For example, Global Orphan project is a 501(c)(3) charity that engages in orphan care and prevention in Haiti and Uganda. Orphan prevention means establishing the GO Fund (a unique impact investment fund managed by GO) that helps start and operate businesses and agricultural ventures that create dignified jobs among the poor and generate profits to help pay for Orphan Care. The oldest and most robust of these is GO Exchange, a boutique collection of products--like Sseko sandals, jammies, jewelry, purses--made in the communities served by orphan villages.
Why would a donor want to get involved with a Ministry Enterprise? Because it may present a better way to do granting and charity. Traditional ministry funding means granting to a charity where the donation will be used up and another needed to take its place—the “churn and burn model”. This is essentially a 0% return investment (not including the charitable deduction the donor gets on her taxes). Even concessionary returns are better than 0% returns.
An Impact Company is a for-profit business that seeks social and eternal gains along with financial ones. To be successful, Impact Companies must run with the best disciplines of business while seeking to make a positive difference in the lives of their employees, vendors, and customers. Impact is NOT an excuse for lack of business excellence. Accordingly, Impact Companies will return risk-adjusted market-rate profits to their investors.
For example, Grace Home Health is an Impact Company that provides, not surprisingly, home health services in the Tampa Bay area. Its experienced leadership team returns significant profits to its investors while implementing a ministry plan with each client and family. Grace is a real business with real returns and positive social and eternal impact.
Why would an investor want to get involved with an Impact Company? Because it represents a better way to do investing; it's part of God's redemption of business and capitalism in general.
Keeping these differences in mind is essential or we risk alienating potential donor/investors by missing their expectations of financial return.
Pete Ochs" business Seat King exemplifies the best of "Redemptive Business" as a means of creating jobs and transforming lives.
Expanding on traditional Evangelism/Discipleship, the idea of Redemptive Business borrows heavily from Praxis Labs’ concept of a “redemptive entrepreneur”, or one who seeks to embody the gospel in creating and building a venture that leaves a meaningful impact on the world.
In the first 18 months of Impact Foundation, we have place $30 Million in 53 Impact Companies, spanning the globe from Silicon Valley to Laos. The impact of those investments encompasses most of the main categories of transformation sought by traditional charity plus a few areas that charity cannot reach. Read about the causes and places that our investments seeks to transform.
Some of our more devoted followers may have noticed that some months ago Impact Foundation and Olive Tree Investments joined forces. If you haven't noticed, or are confused by the combination, this blog is for you.
It’s a natural fit as both groups put charitable capital to work in enterprises that seek measurable social and kingdom transformation while earning money. Impact Foundation offers donors a flexible tool for charitable investment, while Olive Tree searches the globe for the best transformative businesses in emerging markets.
We are excited to welcome Steve Doerr to the team. He recently retired as an executive at ExxonMobil after more than 27 years. As Chief Operating Officer, Steve will help us shore up Impact Foundation's infrastructure and position us for the next phases of growth.
Steve has extensive experience managing diverse global portfolios and has lived and worked in Europe, Asia, the Middle East and Africa as well as the US.
In the spring of 1984 my wife and I were standing in a field in Guatemala on an insight trip led by Opportunity International. I understood for the first time the power of business to accelerate the Great Commandment. I knew empirically and from experience that charity alone cannot eliminate extreme poverty; it's a critical piece of the puzzle, but insufficient on its own. That moment in Guatemala crystallized for me the desire to devote my life to serving the poor with sustainable, finance-driven solutions: not just to make the poor a little less poor but to partner with God in His work of redeeming the world and spreading the hope of the gospel.
I was 17 when my dad died. It was sudden and deeply disorienting. Those days and weeks immediately afterward were a dense fog of grief and cleanup. He died without a will or estate plan (mainly because he had nothing to plan).
As the youngest of 5 kids and the only one still living at home without an adult job, I received the largest "inheritance".
Part 2 in our "Defining and Measuring Series"
"I own a company and I'm a Christian. Does that mean you can invest in my company?" - We get a version of this question at least once a week at Impact Foundation. Consequently, we've spent a lot of time thinking about what it means to say deploy capital for social and spiritual impact alongside financial gain. Is it enough to have "christian" management? Must the organization sell "spiritual" goods or services?
Part 1 in our "Defining and Measuring Series"
To reach broader adoption, kingdom impact investing needs a unified definition and a basic set of metrics to help determine if it works. Over the next few blogs, we'll explore these issues but first can't we find a better phrase?
"Kingdom" in our usage refers to the kingdom of God, as Jesus described it in His teachings. Not every follower of Jesus is comfortable with this phrase. For us at Impact Foundation, the hope of this Kingdom drives everything we do. Thus, it seems a suitable adjective to differentiate our version of "impact investing" and the least bad option.
part 3 of 3 in our "Defining and Measuring Series"
Tracking performance of investments to determine if we're meeting our goals for spiritual transformation feels like the holy grail of Kingdom Impact Investing. It’s time to put forth a working version that can be implemented now and improved over time because we have seen the power of Kingdom Impact Investing and want to unleash it for more good.
Sitting between Thailand and Vietnam, the country of Laos is marked by rugged mountains and one of the lowest per capita incomes in the world. This poverty fuels the two largest industries in the Golden Triangle (Laos, Burma, Thailand, and Myanmar): opium trade and human trafficking.
Jobs and the hope of the Gospel - they're needed here perhaps more than anywhere else. Fortunately, the Lao government has been implementing reforms meriting attention from US investors. For those interested in alleviating poverty through sustainable business, it's an attractive place. That it why Laos Agriventure got its start.