Let’s be honest, philanthropy alone can’t solve large-scale, complex social problems—there simply aren’t enough foundation dollars to go around. But philanthropy can and should take chances on big projects and innovative ideas to meet these challenges—risks that the private sector and government can’t or won’t take on. 

Foundations are increasingly exploring a new way of risk-taking by using impact investing—making loans and investments that have double-bottom-line goals of financial and social return on investment. For example, by providing low-cost financing via low-interest loans, some funders help organizations attract new sources of private sector and other funding. But even foundations that don’t have an impact investment program can have similar—or even greater—effects by getting creative with how they structure their grants.

Here’s how: A foundation can help a grantee attract debt financing from new or more risk-averse investors by making a grant that acts as a financial guarantee against losses, effectively limiting risk for subsequent investors. By structuring the grant with matching incentives and “triggers” to unlock higher levels of funding, foundations can draw in private capital even more quickly than through an impact investment, because they don’t require a financial return. 

But grantmakers can be slow to consider this kind of funding. Sometimes they’re simply too risk-averse, or program officers may not have confidence in their ability to evaluate business terms. But all foundations are investors, and their investment teams can work with program officers to determine whether an impact investment, or a grant that acts like one, is an effective approach to meeting their goals. Alternatively, an outside consultant can provide the necessary expertise and due diligence.

The Atlantic Philanthropies recently joined with Arabella Advisors to tackle just this challenge. As a limited-life foundation about to conclude its grantmaking in 2016, Atlantic has been identifying opportunities for culminating “big bet” grants that will capitalize on its experience, scale, and higher tolerance for risk to drive transformative change in fields where it has historically worked. Many of these big bets are designed to engage other funding and management partners, and thus enhance grantees’ long-term sustainability.

Promoting equitable access to quality health care has long been among Atlantic’s global objectives. It helped support advocacy for new requirements under the Affordable Care Act that are transforming the US health care marketplace to improve health care quality and contain costs. But while for-profit and well-capitalized nonprofit health systems and plans can tap deep balance sheets or traditional capital markets to make needed changes, smaller, community-based health care organizations are struggling to make the necessary investments in technology, staffing, and facilities to remain competitive. Safety-net providers and plans that serve low-income and other vulnerable communities are themselves underserved by commercial banks and other sources of traditional capital. Because they are often unable to access the funding they need to transform their operations, these organizations are increasingly closing their doors or being acquired by larger commercial plans, threatening their original mission as they integrate their new parent companies’ strategy, systems, and cost structure.

Atlantic saw an opportunity to address this crucial market gap by making a grant to Vital Health Care Capital (V-Cap), a community development financial institution. V-Cap provides financing and development services to nonprofit, mission-driven health care plans and providers that deliver critical services and create good health care jobs within disadvantaged and vulnerable communities. The project was right; the next step was to determine how Atlantic’s funds could help.

Arabella provided Atlantic with due diligence on V-Cap’s business structure, operations, and plans for growth, and determined that providing a combination of “first-loss” capital—credit from a grantmaker who will take the first losses on an investment to encourage risk-adverse co-investors—and operational support would be the most effective use of grant funds. First-loss capital allows a grantee to speed up the process of raising capital from investors, but is usually the most challenging capital for organizations to raise, typically taking many years. With the Atlantic grant, V-Cap aims to attract other investment capital quickly, develop its foundational structure and scale its financing sustainably over the next decade, well after Atlantic completes its grant making.

Atlantic’s support of V-Cap is more than just a grant; it also functions as an impact investment. Its $12.5 million grant commitment to this new organization has already leveraged $22.5 million in new funding from private investors and other foundations in less than a year after the grant was awarded. In supporting mission-driven financial infrastructure for developing access to health care and good health care jobs, this grant creates a renewable resource in vulnerable communities that will sustain and scale impact over time.

This is just one example of how funders are successfully using creative grant structures to leverage investments and support market development. Another example is the AARP Foundation, which made a significant grant as well as a debt investment to launch AgeStrong, the country’s first impact investing fund targeting organizations and innovations that support Americans aged 50-plus. AARP’s grant investment allowed Capital Impact Partners and the Calvert Foundation, the fund’s intermediaries, to attract investors spanning financial institutions, foundations, and even individuals, thanks to grant funding that helped to reduce the financial risk to investors.

Impact investing doesn’t always require new tools, but rather new ways of thinking about the ones we already have. With a little creativity—and the ability to tap in-house or outside financial expertise—funders big and small can invest for impact, and fill needs and gaps that are beyond the reach of traditional program funding. And that’s a good deal for everyone.

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