(Illustration by iStock/Rudzhan Nagiev)
Kevin Starr’s critique of impact investing resonates with anyone who has worked where results cannot clearly be linked to invested capital: Intentionality without additionality is mostly theater. Market-rate capital rarely flows toward the places where risk is real, margins are thin, and the human stakes are highest. The assumption that deep social change can be achieved without trade-offs in returns, liquidity, or risk, has often hollowed out the middle of the social impact field, leaving entrepreneurs in low-income and high-complexity contexts stranded, between philanthropists who see them as too commercial and investors who see them as too risky. No one is well served by euphemisms. Starr is right that calling concessionary capital what it is—philanthropy—can restore a kind of moral clarity and operational discipline.
However, the argument makes some assumptions about who benefits from impact and where returns actually accrue, classifying the activity as philanthropic if the investor cannot capture a market-rate financial return. However, in the social impact field, our work often produces public cost savings that must be understood in a different framework. Interventions might be economically productive without being privately capturable, where the returns do exist, but land elsewhere.
That distinction is visible, concrete, and measurable in places like Austin, Texas, where I serve as the CEO of The SAFE Alliance (the largest organization in the South providing services for survivors of domestic and sexual violence, sex trafficking, and child abuse). Our services conservatively save public systems $120 million per year in avoided costs. These savings are not speculative. A substantial body of research shows that stabilizing high-need individuals typically reduces public expenditures by approximately $20,000 per person per year, once health care, shelter, and justice-system costs are accounted for; SAFE’s approximately 6,000 people served annually yields striking public savings.
Despite the scale of these savings, however, they accrue primarily to systems that do not fund SAFE’s work at levels that reflect the value they receive: emergency departments that see fewer crisis visits, law enforcement and courts that handle fewer incidents, child-welfare systems that avoid foster care placements, and public payors that shoulder less long-term medical and behavioral health costs. The return is real, but it is structurally displaced, captured downstream by public institutions rather than upstream by the organization or capital that generated it.
This dynamic becomes clearer when examined program by program. SAFE Futures, our intensive family-stabilization initiative, operates on an annual budget of roughly $700,000 and helps children remain safely with their parents or kin rather than entering foster care. In a single year, SAFE Futures supported 149 children in avoiding foster care placement. From even conservative estimates of foster care and child-welfare systems costs—ranging from $5,000 to $10,000 per child per month when casework, courts, and Medicaid-funded care are included—this translates to $9 to $18 million in avoided public costs in a single year. The public return is roughly $12 to $25 for every dollar invested, even before accounting for long-term educational, health, and economic outcomes for those children.
We can see a similar pattern with SAFE’s forensic center for survivors of sexual violence. Hospitals routinely absorb the high, poorly reimbursed costs of sexual assault medical forensic exams (conservatively $10,000 per case when staff time, infrastructure, medications, labs, and other costs are included). By conducting more than 500 exams annually in a specialized, survivor-centered setting, SAFE generates at least $5 million per year in avoided or more efficiently delivered hospital system costs (while also reducing emergency department congestion, improving evidence quality, and minimizing the retraumatization that drives repeat care). Over the past decade, SAFE’s forensic services have saved public systems approximately $50 million while receiving less than $1 million in direct investment. SAFE conducts an estimated 85–95 percent of all sexual assault forensic exams in the county within a specialized, survivor-centered setting, a level of coordination and consistency rarely achieved in the United States. Fully funding the approximately $3 million annual cost of these services would sustain a proven response that delivers care more efficiently, reduces system strain and liability exposure, and strengthens accountability for sexual violence. It would also position Austin among a small number of communities nationwide replacing fragmented emergency room care with a coordinated model that improves outcomes while lowering public system costs.
If an intervention produces tens of millions of dollars in demonstrable public savings, is the capital that enables it “philanthropy”? The SAFE Alliance’s approximately $28 million annual operating budget produces an estimated $120 million in avoided public costs, representing a system-level return of $4 for every dollar invested.
The issue in this case is not that the work lacks economic returns but that our public finance systems are poorly designed to recognize, budget for, and reinvest in the value they already receive. What can appear as concessionary capital at the organizational level is really a bridge across a coordination failure, for which the state continues to pay, but only after harm has occurred. The challenge is less that impact investing sits awkwardly between philanthropy and markets, but that prevention and early intervention sit between public budgets that reward crisis and markets that cannot, or simply do not want to, price avoided harm.
Of course, it is still true that what I am describing is, by Starr’s definition, philanthropy. Capital still takes a hit in the service of impact (even if it’s impact that would have been paid for by public funds). But philanthropy has long functioned as the mechanism through which society covers the gaps left by public systems, funding what governments will not, or cannot, pay for. This kind of public cost-savings analysis reveals the problem with stopping there: If everything that absorbs misrouted public value is “philanthropy,” then philanthropy has become a substitute for public finance failure, with consequences we need to reckon with. The “hit” philanthropy absorbs in these cases is not evidence that the work is uneconomic; it is evidence that public systems are failing to recognize and route the value they already receive. The system still collects its debts—through emergency rooms, courts, foster care, and disability systems—when those debts are not collected earlier through taxation or appropriate public investment. Treating this dynamic as philanthropy alone collapses a governance failure into a moral category and obscures the distinction between work that truly lacks economic return and work whose value is simply misrouted.
Pay-for-success models, prevention and early intervention compacts, and outcome-based contracts are imperfect but telling responses to this failure. They exist because savings are being generated, but public systems still lack durable ways to recognize, capture, and reinvest those savings upstream. But such mechanisms are less evidence of confusion between philanthropy and markets, than they are ways public systems are struggling to modernize their budgeting and accountability structures. The risk is that philanthropy becomes a permanent substitute rather than a bridge: When the work that organizations like SAFE do is framed as generosity rather than public value creation, responsibility quietly shifts from redesigning systems to pay for what works to hoping donors continue to be kind, entrenching inequities in who receives protection and stability.
Markets alone will not save us, as Starr is right to observe, challenging the self-deception embedded in much of what passes for impact investing. But public cost-savings work demonstrates that there is something in between philanthropy and the market. The challenge, then, is not how we label capital, but whether public systems are willing to pay for what already works and to redesign their budgeting and accountability structures accordingly.
Read more stories by Pierre R. Berastaín.