CHIP's Katherina Rosqueta: 'India and China Will Leapfrog Past the U.S. in Impact Investing'Published: May 19, 2011 in India Knowledge@Wharton
One of the most pressing needs in philanthropy today is also the most perplexing -- assessing the social impact of funds contributed. Simply put, how do you get the most good for your philanthropic buck? That is the million-dollar question the Center for High Impact Philanthropy at the University of Pennsylvania is seeking to address. "It is part of our DNA to constantly be thinking about the most effective and efficient use of funds," says executive director Katherina Rosqueta. Founded by alumni in 2006, the Centre provides donors with evidence-based and actionable information on how their funds can be put to the most intelligent use. In an interview with India Knowledge@Wharton, Rosqueta talks about the importance of social impact analysis, new trends in philanthropy and different approaches to philanthropy across the world. Countries like India and China, she believes, are likely to leapfrog past the U.S. in enabling impact investing.
An edited transcript of the interview appears below.
India Knowledge@Wharton: What does the Center for High Impact Philanthropy do?
Katherina Rosqueta: Everything we do can be boiled down to answering one question: If you had a million dollars, how would you spend that money so that it makes the greatest difference in the lives of others?
There are many motivations and approaches for engaging in philanthropy, and not every donor is 100% focused on the social impact his funds will have. We're not looking to help donors who want to simply have their name on a building, or who are giving back primarily out of a sense of obligation.
However, when a donor is clearly focused on achieving social impact -- whether it's a million dollars or a hundred dollars -- we provide answers that are not only informed by the best available evidence, but are also actionable.
India Knowledge@Wharton: What does a social impact analysis look like?
Rosqueta: First, it requires a multi-disciplinary team, because getting a smart, actionable answer to that million dollar question involves synthesizing evidence from a variety of places and disciplines. For example, some of the answers to the question, "How can philanthropic capital lift the burden of malaria?" come from the academic research. Some of it comes from grey literature such as program evaluations, well-drawn case studies, policy analysis and nonprofit financial information. And some of what a donor needs to understand to have impact is not yet codified; it's in the practical wisdom of practitioners on the ground. Our team accesses all three sources of evidence. When all three point in the same direction, we have a high impact philanthropic opportunity.
In conducting a social impact analysis, we ask four key questions:
Question 1: What is the change in the world donors hope to achieve?
All of our analyses start with clarity about the social impact sought. Is it meaningful for the people that the philanthropy aims to help, and what are the metrics that will help a donor understand whether he or she is making any progress?
Question 2: What works, and what doesn't?
There is no meaningful impact today that others haven't tried to address before. As a center that was founded by Wharton alumni, it is part of our DNA to constantly be thinking about the most effective and efficient use of funds. If you don't know what works and what doesn't, you risk wasting money reinventing the wheel. Or worse, wasting money making the same mistakes others have made before.
Question 3: Where there has been success, how much did change cost?
Too often, philanthropic information is focused only on how much good is created or on crude cost ratios, such as percentage of funds going to programs vs. overheads. For donors seeking to maximize the social impact of their funds, you need to link considerations of cost with impact, even if it's simply a back-of-the-envelope estimate. These kinds of benchmarks help donors assess different models, understand what is reasonable to expect, and [evaluate] where there might be opportunities to have more impact.
Question 4: What are some nonprofits on the ground that are well-positioned to deliver this impact?
We always profile specific nonprofits' work in our guides, but we don't view ourselves as a nonprofit rating agency. We do this because it is difficult for donors to understand a model fully unless they have an example of how one organization is getting the job done. Even when a donor doesn't fund that particular nonprofit, we have found that the level of detail we provide allows donors to improve the impact of organizations they already support. Such detail can also help donors who are crafting new, entrepreneurial philanthropic ventures.
India Knowledge@Wharton: You talk about decision-making tools for donors. What are some of the tools that allow donors to understand where their funds can have the greatest social impact?
Rosqueta: We're probably best known for our donor investment guides, all of which can be downloaded for free from our website (www.impact.upenn.edu). These guides are analogous to the kind of analyst reports that a financial investor might access. In each guide, we take a social impact area -- such as increasing access to food or improving child survival -- and answer the questions I outlined earlier when I described what goes into a social impact analysis.
Another way is through invitation-only donor seminars. These are executive-education-like offerings for donors to learn in a purely educational setting, where a strict, solicitation-free zone is enforced. We've found that many donors welcome the chance to interact with each other, interact more directly with our team, and learn from faculty that includes leading nonprofit practitioners, academics, policymakers and fellow funders.
A third way is through mainstream press and social media. Our blogs and tweets are followed and posted on Facebook, LinkedIn, etc., and often picked up by the mainstream press. For us, these channels are important ways to connect donors to information they trust. Our "I'm Not Rockefeller" study and the work of others have shown how important peers and the mainstream press are in shaping philanthropic decisions.
India Knowledge@Wharton: Why is there an emphasis on a strict, solicitation-free zone for your donor seminars?
Rosqueta: Many people are trying to communicate to donors. There's a lot of information -- some would argue, too much information -- surrounding philanthropy. Since much of that information is being provided by folks with a vested interest in receiving money from donors, that information can be discounted by the donor, even if it could be useful.
Because our donor seminars are framed as solicitation-free zones and because the curricula are built around a rigorous social impact analysis, they provide a rare chance for donors to cut through the noise of information that is out there.
India Knowledge@Wharton: I'd like to get back to your donor investment guides. You have ones for the U.S. How do you imagine they would differ for India, China and other big countries around the world?
Rosqueta: We started writing our donor investment guides for a U.S.-based donor. There are certain considerations that are specific for U.S.-based donors, such as whether a nonprofit whose model we profile is a 501(c)3 with U.S. tax-exempt status. The relative role of government in addressing a particular social impact can also be an important difference between a U.S.-based donor's perspective and the perspective of a philanthropist based elsewhere.
However, the approach to identifying high impact models is the same. Having clarity around the change you seek, understanding what works and what doesn't, getting an empirical sense of the impact and the resources required to achieve it ... these are essential to translating philanthropic funds into social impact, no matter where you are.
In addition, many of the models we have analyzed have had evidence of impact outside of the U.S. in places like Bangladesh, India and Haiti. In fact, when you look at philanthropic models with a track record of achieving impact, the principles are often the same, regardless of where those models are implemented. For example, in our public health work, bringing care directly to people's homes through trusted messengers and providers is a core principle of high impact, community-based models for vulnerable communities, whether the community is in north Philadelphia or rural India.
Despite work that has historically focused on a U.S.-based audience, we have heard from donors and advisors from around the world who have accessed our guidance. After the earthquake and tsunami in Japan, our team recently discovered that a philanthropic organization had translated our disaster relief guidance into Spanish.
We are actively trying to understand how we can help donors do more good, no matter where those donors are located. We're eager to find partners who can help us do just that.
India Knowledge@Wharton: What, in your opinion, have been some significant trends in the evolution of philanthropy over the years?
Rosqueta: Two thousand years ago, Aristotle said, "To give away money is an easy matter and in any man's power. But to decide whom to give it to, how much and when, and for what purpose and how, is neither in every man's power nor an easy matter." About five years ago, Warren Buffett made a similar observation when he made his historic commitment of funds to the Gates Foundation. So I always hesitate to discuss trends in philanthropy because there is an important challenge to this work that, unfortunately, never changes.
However, there are new tools and vehicles available to today's donors that previous donors did not have. For example, in the information-rich world in which we live, social media has given more individuals ready access to information, pictures and real-time data that can support philanthropic giving. Such access to information has been especially promising in disaster response philanthropy where the need for first-responders to obtain accurate, on-the-ground information quickly is essential for saving lives.
Technical advances in areas like health metrics and lives-saved calculators are helping donors working in those fields analyze more concretely the potential effect of their giving.
New philanthropic intermediaries have sprung up to help connect donors with opportunities to have impact. In the U.S., these include professional philanthropic advisors, peer giving circles and information exchanges. Examples of such intermediaries in South Asia include Dasra and Impact Investment Exchange (Asia).
More educational opportunities exist for both donors and nonprofit managers. Universities around the world are examining issues of social impact, nonprofit management, social enterprise and philanthropy. Though still nascent as an academic discipline, such programs can help bring more disciplined thinking and evidence-based practices to donors' work.
Finally, impact investing -- the idea of funding businesses that produce not only financial, but also social returns -- is also a relatively new phenomenon and one that offers the potential to dramatically increase the flow of capital to do good. In fact, I suspect that places like India and China, which have not had the same history and tradition of an independent third sector as the U.S., will leapfrog past the U.S. in enabling impact investing.
India Knowledge@Wharton: Warren Buffett and Bill Gates recently visited India on their philanthropic drive. However, their visit was met with mixed reactions. Some believe it was because, traditionally, most Indian acts of philanthropy are done quietly, without the hype that the Buffett-Gates initiative brings. Do you think their philanthropic philosophy will work in India and different countries?
Rosqueta: As vast new wealth is created in India, China and other non-Western countries, the resulting philanthropy is turning out to be very different from what we know in the United States. That should come as no surprise given important differences in history, cultural traditions and nonprofit roles within each country. If I had to sum it up in one word, I would say that right now, Indian philanthropy is more intimate than American philanthropy. There are two reasons for this.
First, nearly 80% of India's one billion plus population lives on less than US$2 per day. There are more than twice the number of desperately poor people in India as there are people in the entire U.S. population. The poor are, quite literally, everywhere. Unlike their wealthy U.S. counterparts, Indian philanthropists are far more likely to see need in their midst and to have some personal relationships with the beneficiaries of their generosity. These beneficiaries may be their own domestic servants, members of their own extended family, or their village.
Second is the dominant role of government in supporting charitable organizations. In India -- as in China -- individual donors account for approximately 9%-10% of donations. In the U.S., donations by individuals account for more like 70%-75%. In India, social services have traditionally been funded and/or delivered primarily by the government. By contrast, privately-funded, nondenominational nonprofits have played a central role in U.S. society, serving as the nation's first schools, hospitals, libraries and fire departments. As a result of these differences, Indian donors tend to give to smaller, grassroots nonprofits when they give to organizations. Again, there is an intimacy to their current approach.