Paul Brest and Kelly Born’s article is a useful reminder to impact investors to keep our means and ends sorted—at the end of the day we share an interest in making a positive difference even if we tend to talk most about deals and money flows. As the article reminds us, the point is to ask “Did we make a difference?” not “Did we move the money?”

The concept of additionality—producing beneficial social outcomes that would not occur but for our investment—is theoretically useful to answer this question honestly. But the world of investment practice is messier than the elegant theory accounts for. When we consider the approximately 700 impact investments we have made over the last 30 years at the Nonprofit Finance Fund (NFF), we cannot always make a clear-cut assessment of additionality—it is muddied by time, geography, and evolving actors and conditions in a given market. And increasingly we see that achieving, let alone measuring, impact requires us to work at a systems, not organizational, level.

Because we “move the money” through investments in specific enterprises, our analysis of impact often focuses on the impact that specific organizations make. But making a sustainable difference in the communities we care about requires us to understand deeply the context in which these enterprises operate. Retreating government funding for our social system is the defining context for communities in Western countries. In this context, impact investors must understand how our investment capital will support not just an individual enterprise’s growth, but our broader society’s ability to adapt to new economic realities. The discussion of “nonmonetary impact” in Brest and Born’s article points to some additional ways that impact investors can make a difference beyond providing capital. But their descriptions of these activities still focus ultimately on creating conditions for individual enterprises to flourish.

We increasingly find in our work that intervening at the level of the enterprise is no longer adequate. Even with the right investment, great management, and a high-impact product or service, many of our clients will not succeed unless the systems in which they operate fundamentally adapt to new realities. Organizations previously reliant on government funding must develop new abilities to generate revenues from customers, corporations, and private donations. Enterprises addressing social challenges “downstream” must figure out how to intervene earlier, when interventions cost less, both socially and financially. And they must be able to prove their value in order to win increasingly fought-over revenues from discerning customers and shrinking government budgets.

In many cases, impact investing is a necessary but insufficient input to this adaptation. Investment capital enables organizations to build channels to new sources of revenue, shift into new service areas, or invest in the information systems that can help them prove their value. But adaptation also requires other parts of the system to change: government must change how it pays for services, enterprises often must collaborate in new ways, and social movements will be required to sustain a basic commitment to fund the social services these enterprises offer. This type of systemic adaptation requires what we at NFF have come to call a Complete Capital approach that blends financial capital (the right mix of investments and grants), intellectual capital (the right ideas and information), social capital (the right networks), and human capital (the right people and expertise). (See “Complete Capital,” Stanford Social Innovation Review, winter 2013.)

There are gathering examples of Complete Capital approaches at work. Most recently, the J.B. and M.K. Pritzker Family Foundation announced in June two impact investments and a grant as part of its Early Childhood Innovation Accelerator. By starting with a clear social goal—increasing the availability and quality of early childhood education programs for disadvantaged children—the foundation has leveraged its impact investment in an integrated program that responds to a dynamic context in which research on what works and policy change will drive long-term impact as much as any specific enterprise in which it invests. The Omidyar Network’s compelling “Priming the Pump,” published by Stanford Social Innovation Review, pointed to a similar perspective on how impact investing could best be placed within a broader understanding of the need for systems change.

The Complete Capital approach makes it harder to measure the stand-alone impact of impact investments. But it’s increasingly clear that in many areas it’s the only way to create sustained improvements in the social outcomes we care about, and to make all our deals worth talking about.

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